Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Oral Answers to Questions — TRADE

USSR

Mr. Thorne: asked the Secretary of State for Trade what progress has been made in regard to increasing trade with the USSR since the Prime Minister's trade agreement with the USSR of February 1975.

The Secretary of State for Trade and President of the Board of Trade (Mr. Peter Shore): As I stated in the answer which I gave my hon. Friend the Member for Wolverhampton, North-East (Mrs. Short) on 15th December last, our exports to the Soviet Union in 1975 had almost doubled in value compared with 1974. A substantial volume of business is currently under negotiation and now that the tenth Five-Year Plan has been approved we hope for the early conclusion of some important contracts.

Mr. Thorne: I welcome my right hon. Friend's statement, but what are the early prospects for extending exports of technological goods such as photo-elastics and aircraft equipment? What are the prospects for improving the export of textiles from Britain? Further, will trade be a subject for discussion with Mr. Gromyko next week?

Mr. Shore: Although some trade matters may be touched upon, if Mr. Gromyko so wishes, during his forthcoming visit, the normal channel for trade talks is either directly with Mr. Patolichev, who was here last December, or at the annual meetings with the Joint Commission, the next of which will be held

in London in May, when Mr. Kirillin and his team come to London.
There has been, and is, a substantial export trade in textiles and textile machinery from Britain to the Soviet Union. There are a number of prospects for the aerospace industry generally. These matters are under discussion.

Mr. Speaker: Order. Let us begin the week as we intend to continue. When an hon. Member asks a supplementary question, let it be in me singular.

Mr. James Lamond: Is my right hon. Friend aware that he has given a most encouraging answer? Does he appreciate that such an answer makes a much more positive contribution towards world peace than the belligerent speeches we have heard from the Opposition in the past few months?

Mr. Shore: I do not think that belligerent speeches necessarily help the promotion of trade. It is important that it should be understood on both sides of the House that there has been a substantial increase in Soviet trade generally with the Western world, and that Britain's share of that increase in recent years has been far too small.

Whisky

Mr. Crawford: asked the Secretary of State for Trade what steps his Department is taking to encourage further growth in the exports of Scotch whisky.

The Under-Secretary of State for Trade (Mr. Eric Deakins): The wide range of export services provided by the British Overseas Trade Board is available to exporters of Scotch whisky to help them to expand their already substantial overseas sales. My Department has also taken every opportunity to make representations to certain countries about trade barriers that are hindering exports.

Mr. Crawford: Will the hon. Gentleman do everything in his power to persuade his right hon. Friend the Chancellor of the Exchequer not to increase the duty on a bottle of whisky by 65p in the forthcoming Budget? Is he aware that such an increase, allied to the 70p that was added to the duty payable on each bottle of whisky in the previous Budget, would do inestimable damage to


the industry's export and employment prospects?

Mr. Deakins: I am sure that my right hon. Friend will take note of the hon. Gentleman's point about this very important export industry.

Mr. Alexander Wilson: Bearing in mind nationalist or separatist policy, will my hon. Friend take into account that 1·3 million tons of malt barley is produced in Britain every year, whereas only approximately 0·27 million tons is produced in Scotland? Will my hon. Friend ask the nationalists what they mean by Scottish whisky?

Mr. Deakins: I believe that Scotch whisky is a brand name which is known throughout the world. It comes mainly from Scotland, but it is basically a British export.

Motor Cars (Imports)

Mr. Hal Miller: asked the Secretary of State for Trade what are the import prices both before duty and after landing of the various makes of car of East European manufacture; and what representations about these prices he has received from British manufacturers.

Mr. Neubert: asked the Secretary of State for Trade what representations he has received from British Leyland or Chrysler regarding dumping of COMECON cars in the United Kingdom.

Mr. Deakins: Retail prices are available for these cars, but I cannot disclose import prices, since to do so would breach the confidentiality of information obtained by the Commissioners of Customs and Excise under their statutory powers.
Informal discussions about these imports have taken place between officials and representatives of the Society of Motor Manufacturers and Traders, but I have received no representations directly from British Leyland or Chrysler.

Mr. Miller: I shall resist the temptation to give the Minister the landed prices, which are in my possession. Does he accept that the import price of these cars from Eastern Europe is up to £400 below the imported landed prices of continental cars with the same equipment? Will the hon. Gentleman seriously consider their

pricing and the possibility of taking some action against dumping, which is different in terms of State-managed economies from what it is in free economies, under the GATT rules?

Mr. Deakins: The import penetration of these cars was 1·68 per cent. in 1975. I assure the House that should the industry wish us to consider anti-dumping action we would be prepared to look into the matter.

Mr. Neubert: If the Polski Fiat is not a case of dumping, will the hon. Gentleman say how it is possible for it to undercut the selling price of perhaps its closest competitor, the Morris Marina, by nearly 25 per cent.?

Mr. Deakins: Without evidence I do not know whether this is a case of dumping. There are special procedures for determining whether imports from non-Market countries are being dumped, and, if so, what the margin is.

Mr. Ford: Does my hon. Friend agree that, although it is difficult to prove dumping, it would be more helpful if, before they were allowed to import them, importers were obliged to demonstrate that the goods they wished to import were not to be dumped?

Mr. Deakins: That may be helpful in some respects, but such a major change to the GATT anti-dumping code could also be used against successful British exports overseas.

Mr. Tim Renton: Will the Minister accept that prima facie there is clear evidence that these cars are being dumped in this country? During the forthcoming visit of Mr. Gromyko, will he take the opportunity to emphasise to the Russians that a bilateral trade agreement means that there are two sides to a bargain?

Mr. Deakins: On the question of dumping, it must begin by steps being taken by the industry concerned. The industry knows what it is necessary to do if there is to be a ban on dumping. The case must be based on a threat of material injury. In other words, the ball is in the industry's court.

Mr. Stonehouse: asked the Secretary of State for Trade what were the foreign car imports in numbers and value into


the United Kingdom for the last convenient year; what proportion of the total market they took; how this compares with the last month; and what were the numbers of Japanese cars in these periods.

Mr. Shore: In 1975, 452,000 cars were imported, including 125,000 from Japan. One-third of registrations last year and about the same so far this year were accounted for by foreign cars. With permission, I shall circulate the full figures in the Official Report.

Mr. Stonehouse: Do not these serious figures predicate the collapse of the British motor car industry in 10 or 15 years' time, apart from specialised cars? I appreciate what the Secretary of State said in support of the British car industry, but what does he intend to do immediately to improve its efficiency and performance, so that this trend can be stopped?

Mr. Shore: It would be a defeatist attitude simply to extrapolate trends. That is one of the vices of Britain at present, in a more general context. I do not envisage a collapse of the British motor car industry. On the contrary, I envisage a very strong revival, enormously assisted

Total Imports



Number ('000's)
Value (£million cif)
Market* penetration Percentage
Imports from Japan Number ('000's)


1975
…
…
…
…
452·1
516·5
33·2
125·0


January 1976
…
…
…
…
37·6
52·5
32·5
11·1


February 1976
…
…
…
…
N/A
N/A
36·1
N/A


* Foreign cars registered as a proportion of all registered cars.

Paper (Imports)

Mr. Sims: asked the Secretary of State for Trade what progress his Department has made in the consideration of the antidumping applications made by the paper industry in respect of imports from Eastern Europe, Spain, Portugal, Brazil and Switzerland.

Mr. Kilroy-Silk: asked the Secretary of State for Trade when he expects to complete his consideration of the British Paper and Board Industry Federation's application for anti-dumping action against imports of paper from Eastern Europe, Spain, Brazil and Switzerland.

Mr. Deakins: We are awaiting further information from the industry. As soon

by the measures already taken by the present Government in assisting the industry—and, above all, through the increased efforts of all those employed in the industry.

Mr. Teddy Taylor: How many of the 452,000 imported cars were from Common Market countries, and has the trade balance in cars from Europe improved or worsened since we joined the EEC?

Mr. Shore: Many more cars are from EEC countries than from Japan. The balance of our EEC trade in completed cars has declined quite dramatically since we joined the EEC. It is a very disturbing trend.

Mr. Alexander Wilson: Will the Secretary of State accept the strictures placed on British Leyland's deplorable after-sales service? Why cannot the company give a two-year guarantee on new motor cars?

Mr. Shore: I am sure that British Leyland is conscious of the deficiencies in certain aspects of its manufacture and sales service, but I have every reason to believe that the new management will give most urgent consideration to all these problems.

Following are the figures:

as this is received, we shall give it immediate consideration.

Mr. Sims: I am grateful for that reply. Is the Minister aware that, often, five weeks elapse between the arrival of cargoes in this country and customs returns being available? Will he accept that more rapid action is necessary to establish that dumping has taken place? Without such action, is there not bound to be increased unemployment in British paper mills?

Mr. Deakins: Presumably the hon. Gentleman has a constituency interest in this subject, and the figures relate to possible imports in 1976 rather than actual imports in 1974 and 1975, when there was a very small market penetration indeed. We have to await evidence of firm orders


because under the GATT code we are prohibited from taking action on grounds merely of allegation, conjecture or remote possibility.

Mr. Kilroy-Silk: Is the Minister aware that these imports have almost destroyed British industry and have led to a total of 20,000 redundancies in the last six years? Will he accept that there is a case for imposing quotas in attempting to stimulate far more use of our own resources, and will he consider providing loans to British industry for capital re-equipment?

Mr. Deakins: The latter point made by my hon. Friend is a matter for my right hon. Friend the Secretary of State for Industry. As for the first part of his supplementary question, I remind him that the anti-dumping application relates to three particular categories of paper—printing, writing and duplicating, and packaging. Imports of those papers in 1975 were a very low percentage of total imports in the market, and on the basis of the 1975 figures there is no case showing material injury. Nevertheless, we shall await evidence of firm orders for 1976. I assure the industry and the House that we are ready to take action if necessary.

Mr. Ronald Bell: Does the Minister recognise that not only have 20,000 jobs been lost but a good many mills have closed? Although I appreciate that this must be a matter of evidence and proof, based on specific allegations, does not the Minister agree that the paper-making industry is in a vulnerable position and that, because it deals with relatively small volumes of material, dumping could be of significant importance?

Mr. Deakins: The paper and board industry generally is a substantial export earner. We should not want to see it damaged by dumped or subsidised imports. We are aware of the industry's concern and we have had considerable correspondence in respect of it. Indeed, my right hon. Friend the Secretary of State for Trade met the manufacturers' representatives of the trade federation and also the unions concerned—SOGAT and the Transport and General Workers Union—on 27th January.

UNCTAD (Meeting)

Mr. Nicholas Winterton: asked the Secretary of State for Trade whether he proposes to attend the forthcoming UNCTAD.

Mr. Shore: Yes, Sir.

Mr. Winterton: I am grateful for that brief but appropriate reply. Will the Secretary of State say what use he thinks the conference will be to the United Kingdom? When he attends the conference, will he ensure that the interests of the British textile industry are fully understood by the Third World?

Mr. Shore: The textile industry and its interests have been the subject of prolonged international discussions and agreements in respect of the Multi-Fibre Arrangement which was reached at the end of 1973. Since that time there have been agreements, under a broad mandate, with individual countries. On the broader question, involving the purpose, hopes and expectations in regard to UNCTAD, it is too early at this stage to judge the situation, but there are many matters of major importance to this country and to the Third World which can be usefully discussed.

Mr. Higgins: Does the right hon. Gentleman agree that it will be most unfortunate if it is necessary for UNCTAD to discuss the kind of competitive exchange rate depreciations which bedevilled trade in the 1930s? Will he give an assurance that this is no part of British trade policy, and publish an explanation why the minimum lending rate was cut after sterling went through the two-dollar barrier?

Mr. Shore: The hon. Gentleman should address that question to my right hon. Friend the Chancellor of the Exchequer. However, given the broad spectrum of matters to be discussed at UNCTAD, I have no doubt that everything relevant to trading policy can appropriately be dealt with.

Mr. James Lamond: Is my right hon. Friend aware that in the textile industry there is considerable anxiety about these matters because, according to the President of the British Textile Confederation, 50,000 people lost their jobs in the


industry in the first nine months of 1975—twice the number directly involved in Chrysler?

Mr. Shore: I sympathise with my hon. Friend, but since we joined the EEC the pace and timing of negotiations are no longer matters to be decided by the Secretary of State for Trade. Nevertheless, I am glad to say that a whole series of negotiations and agreements have been concluded in the past year. I hope that the situation for our textile industry will be significantly easier in 1976.

Mr. Hooley: asked the Secretary of State for Trade if he will publish a Green Paper on Her Majesty's Government's views and proposals for the forthcoming meeting of UNCTAD IV, in so far as they relate to matters within his departmental responsibilities.

Mr. Shore: It is not normal practice to publish Green Papers on our approach to particular meetings of United Nations organisations. However, the Government welcome the views of interested persons or organisations on the issues with which we shall be dealing at the UNCTAD conference.

Mr. Hooley: Does my right hon. Friend agree that there is widespread interest in this subject among many individuals and voluntary bodies, some of whom are extremely well informed? Is he aware that they are becoming rather uneasy at the lack of a clear, published Government policy towards UNCTAD? Will he reconsider what he has just said?

Mr. Shore: I shall consider further what I have said. I understand very well the widespread interest in this subject, but it is an enormously difficult area to bring under any kind of reasonable intellectual discipline. The preliminary agenda of the conference covers the whole relationship between the developing and the developed world. It is a difficult matter to present in an orderly way.

Mr. Tim Renton: As the months go by, does it not become clear that, with or without EEC co-operation, the Government will have fewer and fewer policies to announce at the forthcoming conference? Does the right hon. Gentleman agree that the Prime Minister opened his mouth too wide at the Kingston conference,

raised expectations too high, and thus caused greater disappointment at the lack of a positive outcome?

Mr. Shore: I certainly do not agree. I thought at the time, and have considered even more so since the conference, that the Prime Minister's initiative was extremely well timed and entirely relevant. It concerned a matter that is likely to be the dominant and central issue at the UNCTAD conference—the future regime for raw materials and commodities. I reject entirely what the hon. Gentleman said about my right hon. Friend's initiative. I cannot anticipate the outcome of the conference, but I am entering into the preparatory stages with a good deal more confidence than the hon. Gentleman seems to have.

Mr. Spearing: I accept that the Prime Minister's initiative was well timed and the conference agenda is very wide, but if the Commonwealth alone wishes to advance on these lines, rather than on multilateral arrangements through UNCTAD, will this country be able to conduct such arrangements on its own, without reference to a higher authority?

Mr. Shore: I think I know to what my hon. Friend is referring. There are many fora in which we shall be trying to reach a general consensus on the major issues on the UNCTAD agenda. These fora include not only the EEC but the OECD, and we shall be anxious to maximise any agreement we can get within the Commonwealth as well. I would not rule out an interchange of views between all three organisations making a valuable contribution to our thinking and statements at the conference.

Anti-Dumping Policy

Mr. Arnold: asked the Secretary of State for Trade what initiative he is taking towards the development of an EEC antidumping policy; and if he will make a statement.

Mr. Peter Morrison: asked the Secretary of State for Trade whether he will have discussions with his EEC colleagues on anti-dumping measures.

Mr. Moate: asked the Secretary of State for Trade if he will have discussions


with other EEC Ministers about antidumping measures.

Mr. Shore: There already exists an EEC regulation which governs the handling of anti-dumping cases and reflects the GATT obligations of the Community. I have had conversations with both member States and members of the Commission on anti-dumping matters. There is also an EEC Anti-Dumping Committee of which the United Kingdom is a member and which provides a forum for continuing discussion of these problems.

Mr. Arnold: Since about half of the anti-dumping measures opened by the Community have concerned State trading nations, and given our own problem in this respect, would not a further attempt at the formulation of a joint policy buttress national efforts?

Mr. Shore: The present situation is that anti-dumping powers in relation to third countries remain with this Government until the summer of 1977. During this period it is, therefore, for us to take action on our own account. There is an increasing interchange of views within the Community about trading relations with the countries of Eastern Europe and I have no doubt that anti-dumping policy, among other things, will form part of an evolving policy.

Mr. Morrison: Does the right hon. Gentleman accept that his answers on dumping this afternoon have given the impression that while many discussions have taken place there has been no action? When will he take some action?

Mr. Shore: The hon. Gentleman has made an interesting observation. We have a number of actions which are being formally investigated under our own powers. By contrast, I can point out to the hon. Gentleman that within the EEC, where the dumping powers of the original nation States have been taken over by Brussels, there are only five cases formally under investigation. On any reasonable comparison between this country and others we shall not be found to be in any way behind.

Mr. John Garrett: Is my right hon. Friend aware that last week yet another Norwich footwear factory announced its closure, and that this was due as much

as anything else to the dumping of footwear from COMECON countries? Will my right hon. Friend look into the possibility of imposing quotas on imports of footwear from COMECON countries in the same way as he has done for woollensuits?

Mr. Shore: My hon. Friend will have seen the announcement that I made on 10th March to the effect that the three principal suppliers of leather footwear from Eastern Europe have entered into voluntary agreements, more stringent and with wider coverage than the agreements they entered into and upheld during last year.

Mr. Higgins: On what criterion has the Secretary of State fixed the figure to which his hon. Friend the Member for Norwich, South (Mr. Garrett) referred? Will the right hon. Gentleman make sure that action is taken with respect not only to dumping of goods but to dumping of services? Is he aware that there is a great deal of concern that Russian merchant shipping is at the moment competing on an unfair basis, which may endanger both the contribution that British shipping makes to the balance of payments and the future size of our merchant marine?

Mr. Shore: The question of the dumping of services is a separate matter. It is one to which we have given a good deal of thought and which was the subject of a substantial exchange of questions last month. The criterion we have sought for footwear has been to hold exports at the level that obtained in 1974, was agreed for 1975, and is to be continued in 1976.

Mr. Madden: asked the Secretary of State for Trade if he will review legislation and arrangements to stop dumping of overseas goods in the United Kingdom.

Mr. Shore: I am keeping our antidumping procedures under constant review, but of course I have to pay proper regard to our international obligations.

Mr. Madden: Will my right hon. Friend consider making a major statement setting out the Government's policy and procedure on dumping, in order to dispel the widespread belief, particularly within the textile industry, that the Government are turning a blind eye to blatant instances of


dumping that are adversely affecting British industry?

Mr. Shore: I thank my hon. Friend for that suggestion. I shall certainly give it very serious thought. I think there is some misunderstanding of the Government's position and attitude on anti-dumping matters and if I concur with my hon. Friend's suggestion I shall see that a substantial statement is made.

Mr. Wyn Roberts: Will the right hon. Gentleman send a special delegation to Brussels to look into the question of excessive imports of Italian washing machines into this country, as did the French last week when suffering from excessive imports of Italian shoes and women's tights? Will he also look into the question of the Italian Government's subsidies on credits and industrial investment?

Mr. Shore: I shall consider carefully the hon. Gentleman's suggestion for dealing with the alleged dumping of washing machines from Italy in the United Kingdom market. As he will recognise, even if I thought the evidence was so strong that a substantial representation should be made, this is a matter that the Commission of the EEC has the power to decide.

Mr. Golding: Is my right hon. Friend aware that electric motor manufacturers believe that the application of the present anti-dumping laws is a case of shutting the stable door after the horse has bolted? In this instance, the system could lead to the destruction of the standard electric motor manufacturer in this country?

Mr. Shore: I frequently hear from my hon. Friends and hon. Members opposite of their concern, which I have no doubt is genuine and legitimate, on behalf of particular industries in this country. In a number of cases I am surprised that there has been no representation to my Department by the representative body of the industry concerned. My hon. Friend will understand that we are inevitably impeded in our action unless the industry puts forward a formal submission.

Mrs. Kellet-Bowman: Is the right hon. Gentleman aware that his procrastinating reply will bring further dismay to the Lancashire textile industry? As he has

admitted that the Government are responsible for anti-dumping measures vis-à-vis third countries, will he introduce immediate legislation to expedite anti-dumping action and use administrative measures to stop the rest of the textile industry from being wrecked?

Mr. Shore: The hon. Lady knows that we are bound to follow the international code to which we and other countries have subscribed, and our own remaining anti-dumping powers. There is no procrastination on our part. We are willing to act on any serious submission as soon as the firms themselves can give us the evidence.

Mr. Mark Hughes: Will my right hon. Friend take pleasure, with me, at the fact that Courtaulds, in my constituency, is now recruiting labour on a large scale? That must be a sign of an export-led upturn in the textile industry. Will he confirm that, as the case history of the television tube industry indicates, it is very difficult to take any action on dumping when there is a dispute within the trade body?

Mr. Shore: In his latter remarks, my hon. Friend gets close to the heart of the matter. An industry which is affected may often be divided, or one part of the industry may take a view on anti-dumping which is different from that of another adjacent section of the production process. I am pleased to hear that there has been an upturn in that part of the textile industry represented by Courtaulds, in his constituency, and I very much hope that as a result of the MFA agreement entered into last year there will be more work and output in the British textile industry this year.

Mr. Fletcher-Cooke: If the right hon. Gentleman does make the definitive statement asked for by his hon. Friend, will he include in it details of the sort of evidence that an applicant should enclose with his application? Provided that a prima facie case is made out, will the right hon. Gentleman confirm that his Department will not act in a neutral capacity but will positively assist the applicant in obtaining the evidence, because often only the Department can get it and the application cannot?

Mr. Shore: Yes, Sir. We are only too pleased to assist British firms or industries in the presentation and the compilation of evidence in anti-dumping cases. We fully accept and understand that in some cases the evidence is available mainly through our diplomatic channels abroad. The procedures are set out in the booklet that we make available to anyone who raises the matter with us. I am willing to look at that further, and if there are any doubts to clarify them.

Concorde

Mr. Adley: asked the Secretary of State for Trade if he will make a statement on the latest position concerning Concorde flights to the United States of America.

Mr. Shore: I am in close touch with the situation in the United States of America and will be considering what action needs to be taken either by the Government or by the airlines. I hope to make a further statement soon.

Mr. Adley: Notwithstanding the fact that, following publication of the Coleman Report, both the British and the American Governments are doing their best to ensure a fair trial for the aircraft in the face of opposition from the American manufacturers, airlines and opportunist politicians masquerading under the heading of "The Environment", may I ask the Minister whether he is aware that in this and the French Parliament groups have been formed to support the aeroplane? Is the right hon. Gentleman further aware——

Mr. Speaker: Order. The hon. Gentleman is embarking on his third question. May we have the answer to the first two?

Mr. Shore: The hon. Gentleman began by recalling certain difficulties being met with in the United States. We know about them. It is right that all-party groups have been formed in this country and in the French Parliament, which are determined to give voice to the strong sentiments in France and Britain in favour of flying Concorde to the United States.

Mr. Cope: Will the right hon. Gentleman make it clear as widely as possible in the United States—to the public as well as to the authorities—that if Concorde is subjected to jealous and obstructive opposition there it will gravely

damage Anglo-American and Franco-American friendship?

Mr. Shore: That point is well understood in the United States. We are all looking for a constructive solution to the many obstacles that still exist. We have considerable confidence in the processes of American justice and in particular in the consequences of Secretary Coleman's powerful and authoritative opinion.

Mr. Stonehouse: Since New York, New Jersey and New York Port Authority have no authority with regard to international landing rights, will the Secretary of State make representations to the United States authorities to the effect that they should deal with this opposition rather than that it should be dealt with in the courts by way of appeal?

Mr. Shore: That is one of the matters we need to think about carefully. I shall certainly keep the House informed on all significant developments in this saga.

Mr. Tebbit: Is the right hon. Gentleman aware that we share his confidence that this matter will be satisfactorily resolved through the normal processes of law and diplomacy in the United States? Will he bear in mind that if there is any suggestion of discrimination there will be considerable pressure for unofficial action to be taken—"blacking", in industrial terms, or something of that sort? Should not the United States authorities bear this in mind in reaching a speedy solution?

Mr. Shore: There are indeed all manner of possible reactions, and while we certainly would not wish to encourage them it is only common sense to acknowledge that people quite rightly feel deeply on these matters in this country and in France. Like the hon. Gentleman, I have confidence in the legal processes in the United States. I believe that we shall get Concorde successfully in flight to New York and Dulles.

Mr. Jessel: May I ask the right hon. Gentleman and my hon. Friends the Members for Chingford (Mr. Tebbit), Gloucestershire, South (Mr. Cope) and Christchurch and Lymington (Mr. Adley) to visit my constituency of Twickenham and listen, as I did this morning, to Concorde taking off? Is the right hon. Gentleman aware that if they did so there would no longer be any talk about


people "masquerading under the heading of 'The Environment'" or about jealous and obstructive opposition? Does the Secretary of State not think that those who are anxious about the suffering caused by aircraft noise have in the past been far too gentlemanly with the aviation lobby, which at times behaves in an utterly unscrupulous manner?

Mr. Shore: I understand the hon. Gentleman's concern. I put it to him again, as I did when he last raised this issue, that what people near to airports are most concerned about is not the noise contribution of a particular aircraft but the total volume of jet noise to which they are subjected. It is our policy, and the policy of nearly all leading aviation countries, to see to it that the total volume of noise is reduced.

Airlines (Overbooking)

Mr. McCrindle: asked the Secretary of State for Trade if he plans to introduce legislation on airline overbooking.

The Under-Secretary of State for Trade (Mr. Clinton Davis): No, Sir. But the Civil Aviation Authority proposes to exercise its power as a licensing authority to include a mandatory condition in the licences of United Kingdom airlines for the compensation of passengers who are not carried on a scheduled flight on which they have confirmed space, even though the flight takes place.

Mr. McCrindle: That news is welcome, but, in view of the recent House of Lords decision, will the hon. Gentleman take this opportunity to make absolutely clear that if it is discovered that an airline or travel agent has overbooked a passenger the airline or travel agent concerned will not be in contravention of the Trade Descriptions Act? If there is any likelihood of uncertainty, will the Minister introduce legislation to make the situation absolutely clear?

Mr. Davis: That is a matter not for me but for my right hon. Friend the Secretary of State for Prices and Consumer Protection. The decision of the House of Lords was made on the facts of the case in question, and only on those facts, and it would be wrong to draw from them a more generalised view about overbooking.

Mr. Tebbit: Is the hon. Gentleman satisfied that such a restriction, which presumably would not apply to foreign airlines, will not leave British airlines in a less competitive position?

Mr. Davis: It is necessary to establish a balance between the interests of the airlines and the interests of people who are annoyed and inconvenienced as a result of being put off aircraft flights through overbooking. I am satisfied that the Civil Aviation Authority will go about its discussions with the airlines having regard to the necessity to maintain a balance.

Air Fares

Mr. Steen: asked the Secretary of State for Trade if he is satisfied that reduced passenger travel will not result from differentials in fares for journeys of similar distances but from different airports.

Mr. Clinton Davis: It is the responsibility of the Civil Aviation Authority to determine air fares and to consider their effects on traffic in accordance with the policy guidance.

Mr. Steen: In line with the Minister's enlightened decision to forbid the Civil Aviation Authority increasing its navigational charges at Speke and not at Manchester, will the hon. Gentleman tell the Authority that it has no right to increase the domestic airline fare from Speke to London by £2·40 from 1st April and reduce the fare from Manchester to London by 60p from 1st April, the distances involved being identical?

Mr. Davis: I suspect that there is a constituency interest here. The Civil Aviation Authority, in determining its policies in this respect, must have regard to the law, and I am sure that it is aware of it.

Mr. Trotter: May I ask the hon. Gentleman about flights to Brussels and other destinations across the Channel? How can he justify a situation in which it costs twice as much for a journey of the same distance if one is crossing the water as against an internal flight in Britain, and twice as much as in the case of a flight of the same distance in America? Are not the airlines taking advantage of the inconvenience of


proceeding by any other means, and is not that unfair?

Mr. Davis: It is not right to draw that inference. This is a matter for the Civil Aviation Authority. If the hon. Gentleman wishes to pursue the matter, he should do so with the Chairman of the Authority.

Commonwealth

Mr. Marten: asked the Secretary of State for Trade if he will make a statement about trade with Commonwealth countries.

Mr. Shore: British exports to Commonwealth countries increased in value last year by 20 per cent. over 1974, while imports remained stable. My Department and our posts abroad are alert for opportunities to maintain this expansion.

Mr. Marten: As the Common Market share of our export market is declining whereas the Commonwealth share is not declining, and as, in 1975, we had a balance of trade deficit of £2,386 million with the Common Market, compared with £35 million with the Commonwealth, should not we do everything we can to stimulate trade with the wider market of the Commonwealth and certainly keep out of the currency snake pit?

Mr. Shore: I am anxious to expand trade in all possible ways with our Commonwealth partners. There are difficulties, as the hon. Gentleman is fully aware, because the arrangements with the EEC reduce the opportunities for trade, particularly in food, with Commonwealth countries. That is a feature of the common agricultural policy. Some possibilities for trade exist as a result of the Lomé Convention. The Commonwealth countries concerned are within the EEC ambit and they can trade freely with this country and with others.
As for the Asian Commonwealth countries, we are doing our best through the generalised system of preferences arrangements, and I recently signed an economic co-operation agreement with the Indians, who are the largest of our Asian Commonwealth partners. The other advanced Commonwealth countries are members of the OECD and therefore cannot come easily within special arrangements for trade.

Mr. Raphael Tuck: Will my right hon. Friend come off his ministerial pedestal and, as a private citizen, tell us whether the gloomy figures just given by the hon. Member for Banbury (Mr. Marten) belie completely the great hopes that were expressed three and a half years ago when we joined the Common Market?

Mr. Shore: My hon. Friend knows that I have no difficulty whatever in reconciling my private voice and my ministerial voice on these questions. Those who foolishly thought that at any rate short-term and large benefits would accrue in trade between Britain and the EEC as a result of our membership have been shown to be lamentably wrong.

Mr. Burden: The right hon. Gentleman says that last year there was an increase in value in exports to Commonwealth countries. Will he relate that to volume, and compare it with the previous year?

Mr. Shore: I have not with me the volume figures for the Commonwealth. I should think that the volume figure of our trade increase was probably almost nil, but there must have been a corresponding fall in Commonwealth import volumes.

Mr. Gwilym Roberts: Does my right hon. Friend accept that the increase in exports to the Commonwealth and other areas is a matter not of price alone but of service, quality, delivery dates, and so on? Therefore, does he agree that the recent floating down of the pound was ill advised?

Mr. Shore: I am not here to speculate about the downward movement of the pound, but it is inevitable that with differential rates of inflation there will be exchange rate adjustments. Such exchange rate adjustments have the advantage—together with their disadvantages—that they help to keep Britain's exports competitive.

Mr. Higgins: The Secretary of State's answers reinforce our view that he is not taking the lead in formulating any EEC trade position that we and, I believe, hon. Members opposite would like him to do. Last year he said that the only way out of the crisis into which Britain had been plunged was to withdraw from the EEC. Is that still his view?

Mr. Shore: I accept, as I have said, and as I said at the time, the decision of the British people. The EEC has a trade policy, which is stated in many of the regulations and directives and other arrangements made by the EEC, and those obligations are fulfilled by us, as they are by other members.

Capital Life Assurance and Capital Management Services

Mr. Gordon Wilson: asked the Secretary of State for Trade if he will make a statement on his inquiries into Capital Life Assurance Society Limited and Capital Management Services.

Mr. Clinton Davis: As I told the hon. Member in my letter of 18th December, inquiries are being made into a number of complaints about the terms on which some policies were sold by the company's agents.

Mr. Wilson: Considering that since the Minister wrote to me on that date a further complaint has been given to him, showing that the constituent concerned paid £125 but received back only £4·96 after receiving a promise from the agent that no money would be lost on the deal, will the hon. Gentleman say what further inquiries are being made into the admission by the agent that the promise had been made on the authority of a senior consultant from the company?

Mr. Davis: All allegations of misleading statements—at least those which occurred after 25th July 1973, following which this became an offence—are receiving the most detailed attention by my Department. It would be premature for me to offer any prognosis about what will happen regarding the complaints. Suffice it to say that they are being dealt with fully and properly, as the hon. Gentleman would expect.

Mr. McCrindle: Would it not help to prevent the recurrence of a situation like this if the Minister were to make it clear that on hardly any occasion is life assurance a satisfactory vehicle for short-term investment? If representatives of any company suggest that it is, a statement from the Minister today may prevent people from falling into the trap mentioned by the hon. Member for Dundee, East (Mr. Wilson).

Mr. Davis: The hon. Gentleman will realise that I expressed that view in our

Standing Committee debates on insurance matters. There is a great responsibility on those advising the public on insurance matters, which may constitute a most important aspect of saving in the life of any person. Sometimes that burden is not properly and fully carried out, but as a result of the discussions that we have had with the brokers we hope that a better regime will apply for advice offered to the public.

Air Traffic (North Atlantic)

Mr. Warren: asked the Secretary of State for Trade what agreements have been made between United Kingdom airlines and United States airlines on the capacity to be offered on the North Atlantic from March 1976 onwards; and if he will make a statement.

Mr. Tebbit: asked the Secretary of State for Trade if he will detail the North Atlantic air traffic capacity limitations which he took into account in the considerations which led to his decision to overrule the Civil Aviation Authority's issue of a licence to Laker Airways for the Skytrain service.

Mr. Clinton Davis: Agreements to limit capacity on the North Atlantic routes were first negotiated in the autumn of 1974. They proved very successful in cutting out wasteful excess capacity and substantially improved British Airways' financial results. They were renewed in April 1975 and the present agreements run to 31st March 1976. I am publishing the details in the Official Report. Discussions about the levels of capacity for the summer of 1976 are still in progress.

Mr. Warren: Pending the opportunity of seeing the details that will be published in the Official Report, may I draw to the Minister's attention the statement made by British Airways that the limitations that will be imposed on the London-Miami route will give a greater chance for the airline's staff to fly in the empty aeroplanes at a 90 per cent. discount? Is that in line with his policy?

Mr. Davis: I have not seen the statement which the hon. Gentleman attributes to British Airways. It is important to deal not with the minutiae but with the principle. The principle of capacity agreements has been established beyond all reasonable doubt.

Mr. Neubert: If the Minister believes that the agreement to reduce excess capacity on this route has been a success, are there plans to make similar agreements on other routes?

Mr. Davis: The North Atlantic routes are the most important. There can be no doubt about the success of the agreement and its continuing necessity. The fact that last year there were on the North Atlantic routes to Europe 15·3 million seats on 20 airlines, only 8·8 million of which were sold—an improvement on the previous year—speaks for itself.

Mr. Tebbit: The Minister says that the system of capacity agreements has been approved, but it has never been approved by the House. If no capacity agreements were signed for the forthcoming year, how was he able to make estimates, based on capacity agreements, of the effect of the introduction of Skytrain had it come into operation this summer?

Mr. Davis: This is not a matter that falls to be dealt with by legislation of the House. What I said was that the value of these agreements had been established. There can be little doubt about that. When considering Skytrain we had to formulate a judgment based on what, in our view—and this was supported by the House—would be the likely situation in the year ahead. If no agreement is formulated between the British airline and the American airlines we shall have to consider the position carefully, and in the last resort we may have to impose restrictions pursuant to the Bermuda Agreement.

Following is the information:


UNITED KINGDOM/UNITED STATES CITY PAIRS CAPACITY


Maximum weekly frequencies in each direction




Summer
Winter
Summer




1975
1975–76
1976


London—






Washington
WB
14
10
14


Chicago
WB
14
10
14


Detroit
WB
14
5
10



NB
—
7
—


Los Angeles
WB
14
14
14


Miami
WB
14
10
12


New York
WB
42
21
42



NB
21
21
21


Boston
WB
21
—
15



NB
—
21
—

Notes:

(1) "WB" = wide-bodied aircraft (DC10s, B747s and L1011s).

(2) "NB" = narrow-bodied aircraft (B707s, VC10s, DC8s and Concordes).

(3) In 1976, at the airline's discretion, two narrow-bodied frequencies may be substituted for one wide-bodied frequency at New York and Washington; and seven narrow-bodied frequencies may be substituted for five wide-bodied frequencies at Boston.

(4) There is provision for adjusting the regular capacity up or down, at reasonable notice, if the traffic proves greater or less than is forecast.

(5) Additional flights are operated as necessary to meet peak traffic demands.

(6) On the London-New York sector, one B747 is operated with a seating restriction, as if it were a narrow-bodied aircraft.

Aircraft Noise

Sir George Young: asked the Secretary of State for Trade whether he has any plans to introduce legislation to provide for the fitting of hush kits to conventional jet aircraft.

Mr. Ronald Bell: asked the Secretary of State for Trade when he expects to announce a decision about the retrofitting of the older types of jet aircraft now in service.

Mr. Clinton Davis: Studies show that the noise reduction that might be achieved by the fitting of hush kits to older types of jet aircraft now in service is disappointing; there would be a minimal, relatively short-lived, noise reduction, at large cost. We have not, however, come to any final decision, and I am arranging for a summary of the studies to be placed in the Library in the course of the next few days. We shall be opening discussions with aircraft operators and other interested parties on alternative ways of bringing about a reduction in total aircraft noise disturbance.

Sir G. Young: Is the Minister aware of the inconvenience and distress caused to my constituents and others in West London by aircraft landing at Heathrow? When does he hope to reach the final decision to which he referred in his reply?

Mr. Davis: I am fully aware of the inconvenience and annoyance—a point touched on by my right hon. Friend in answering an earlier question. The matter is a difficult one, which requires international consideration. We shall be


considering it with our colleagues on ECAC, and we await American reflections on this important issue.

Mr. Bell: Is the Minister aware that a great deal of the noise nuisance in constituencies around London Airport comes from the older jets and that it is the older jets which are exempt from the requirements of the Order relating to noise limitation? Is the list of aircraft types excluded from the operation of the Order, which can be known to hon. Members from the deposited paper in the Library, public knowledge, or can it be made so? Lastly——

Mr. Speaker: Order. I should not be fair to other hon. Members I have corrected if I allowed the hon. and learned Gentleman to go on any longer.

Mr. Davis: I am aware that the older aircraft are exempt from the United Kingdom Air Navigaton Noise Certification Order 1970, which is the legislation to which the hon. and learned Gentleman alluded. Older-design aircraft produced after 1st January 1976 are no longer so exempt, but these will be the aircraft first phased out. In due course that will materially reduce the disturbance that the hon. and learned Gentleman's constituents are experiencing.

Electrical Appliances and Television Sets

Mr. Rost: asked the Secretary of State for Trade if he is satisfied that the domestic electrical appliance and television manufacturing industries are maintaining their competitive position in overseas markets and are subjected to fair competition from imported products.

Mr. Deakins: Exports of domestic electrical appliances rose in value in 1975 by a fifth, and probably about held their relative position in overseas markets. Exports of television sets doubled in value and probably improved their share. So far as imports are concerned, we are always ready to consider evidence of unfair competition.

Mr. Rost: Is that not a totally complacent reply, bearing in mind the decline in the electrical appliance and television component industries? To what extent is that due to the Government's imposition of a 25 per cent. VAT rate?

Mr. Deakins: The effect of the imposition of a 25 per cent. VAT rate is a matter for my right hon. Friend the Secretary of State for Industry. However, even before the imposition of that rate our share of world trade in domestic electrical appliances, in terms of exports, had been falling, so there must be other explanations.

Mr. Ioan Evans: Will my hon. Friend consider making representations to the Chancellor of the Exchequer to vary the VAT rate, which is hitting the electronics industry? Will my hon. Friend consider advising consumers to buy British, and the electronics industry to buy British components?

Mr. Deakins: I am sure that my right hon. Friend the Chancellor of the Exchequer will note my hon. Friend's remarks. We naturally hope that wherever possible and practicable British industry will purchase supplies from domestic manufacturers.

European Community

Mr. Shersby: asked the Secretary of State for Trade what proposals he has put to the EEC on the position which the Community should take in the multilateral trade negotiations.

Mr. Shore: The Community's general line in relation to the multilateral trade negotiations was set out by the Council in a series of directives last year. These took into account various proposals I had made designed to remove trade barriers, which have since been followed up by my Department in the detailed preparatory work. Most recently we have proposed significant improvements in the offer that the Community will shortly be making on barriers to trade in tropical products.

Mr. Shersby: Will the Secretary of State tell the House what part he personally played in formulating that EEC point of view?

Mr. Shore: Yes. Some months ago we had a special meeting of EEC Trade Ministers to consider the mandate that the Commission should use as its authority in conducting these negotiations. I assure the hon. Gentleman that the views that I put forward on behalf of the United Kingdom were on that occasion substantially adopted.

Mr. Marten: According to an answer that I received on Friday, New Zealand butter is £300 a ton cheaper than Common Market butter. Is there any hope of reducing the trade barrier that keeps out New Zealand butter?

Mr. Shore: It would be wrong for me to give an optimistic reply, because butter prices come under the common agricultural policy. While I am hopeful of some progress in the multilateral negotiations on the food trade, I am more hopeful of progress in trade in industrial goods and tropical products than in temperate foodstuffs, of which butter is one.

Mr. Higgins: Will the right hon. Gentleman place in the Library details of the proposals he has made to the EEC? Will he ask his right hon. Friend whether we may have a debate on this important subject before the trade negotiations get much further advanced?

Mr. Shore: I shall consult my right hon. Friend the Leader of the House about the hon. Gentleman's latter request. I shall reflect on his former request, and unless there is any difficulty or any impropriety, or if any precedent is being created—although I do not expect such a situation—I shall do my best to oblige the hon. Gentleman.

PARLIAMENTARY PAPERS (SUPPLY)

The Minister of State, Civil Service Department (Mr. Charles R. Morris): With your permission, Mr. Speaker, and that of the House, I wish to make a statement on the supply of parliamentary papers.
The difficulties over deliveries by Her Majesty's Stationery Office transport, of which the House is aware, are not yet resolved, but the papers necessary for today's business are again available in an alternative form, and a limited number of copies of Friday's Hansard are also available in the Library and the Vote Office. As I have previously told the House, all the papers are being printed normally and the inconvenience arises solely because the dispute is affecting HMSO deliveries.
The House may wish me to give some further information about the causes and nature of the dispute. The HMSO

management decided at the beginning of last week to transfer a driver to different driving duties. I am informed that the agreement with SOGAT, the trade union concerned, allows this specifically. The Chapel objected on the ground that it had not been consulted in advance. On Tuesday morning the drivers declined to perform their normal duties in protest.
Joint discussions were held to resolve the issue and the Chapel was also told, in accordance with standard HMSO practice, that the drivers would not be paid for any time they were not working normally. The dispute then escalated into a full-scale stoppage which, HMSO informs me, is outside the terms of the procedure agreement and therefore unconstitutional. I am advised that further joint meetings have been held and a full-time SOGAT official has been involved, but the Chapel has declined to return to normal working unless the drivers are paid in full for the time lost in the dispute. This has now emerged as the central issue in the dispute.
Further efforts are being made today to resolve the issue and to achieve a resumption of normal working. I do not wish to say anything more which might possibly prejudice an early settlement. I regret that the House is experiencing continued inconvenience. I hope that the normal service of printed material can be resumed very shortly. In the event that the difficulties continue, every effort will of course be made to ensure that the essential needs of the House are met as they were last week and again today.

Mr. Peyton: From what the hon. Gentleman has said, it sounds as though a great deal of unnecessary printing is being done. I hope that the hon. Gentleman will realise that, whilst none of us would wish to prejudice the chances of a settlement—to use that time-honoured phrase—Parliament has been exposed to this kind of experience far too often recently. I hope that the hon. Gentleman will take into account the fact that while those involved in such a dispute have a view, Parliament also has one, and that the whole position of Parliament is being outraged if this becomes a habit. I hope that the hon. Gentleman will also take into account that we—both sides of the House—have been very patient for a long time and that it is time that this


sort of thing stopped. It might be helpful if we were to have a debate on this subject in the near future.

Mr. Morris: The question of a debate is a matter for my right hon. Friend the Leader of the House. But this is not a new development in terms of relationships between successive Governments and the operations of HMSO. When the right hon. Gentleman referred to my hon. Friends—and obviously he was speaking in the context of the trade unions at HMSO—I hope that there was no implication in what he said. Whilst I appreciate his concern and understand the frustrations of parliamentarians in regard to the dispute, I need no lessons from hon. Members opposite on the conduct of industrial relations.

Mr. Peyton: I hope that the hon. Gentleman will read in the morning what I said—assuming that he will have the opportunity. I said nothing of the kind that he thought I said. I certainly did not approach the matter from a partisan point of view. I said that Parliament—both sides of the House—was being inconvenienced.

Mr. Morris: I hope that in the morning I shall have the opportunity of reading what the right hon. Gentleman said because my interpretation was based on how I actually heard him.

Mr. Skinner: Will my hon. Friend take into account that, because we are having to have the papers printed in another way, the cost of the additional printing could now perhaps be more than the amount of money involved in the original dispute? Is it not rather inappropriate to be concerned about not paying these men for the dispute when we were told at the weekend that certain trade unionists were to get a sum of money for attending trade union meetings in order to assist the management? Might we not do better along those lines? Is it not at times like this that we begin to appreciate that the drivers normally deliver every day?

Mr. Morris: I remind my hon. Friend that the original dispute was about the allocation of drivers to particular duties. It was not a question of paying men for not working. The question of paying men during an industrial dispute is now

emerging as the central issue. It is a subject of discussion between the two sides.

Mr. Peter Bottomley: Is the hon. Gentleman aware that the inconvenience we all feel from this sort of dispute—which we all regard as one which should be settled as soon as possible—is what overseas customers of British companies feel when British products cannot be delivered because of some nonsense that ought to be settled? Will the hon. Gentleman also accept that if the problem is merely one of delivery—just as when my children cannot go to school by bus because of a bus strike I take them by car—some of us could perhaps take our cars and bring the papers here ourselves?

Mr. Morris: This is a serious dispute. I have responsibility for HMSO and not for bus undertakings.

Mr. Stonehouse: If the dispute continues, could not arrangements be made for hon. Members or their representatives to go to the printing works and get their Hansards and other documents they require? Why cannot that be done?

Mr. Morris: I hope that no hon. Member will take action which in any way exacerbates the dispute.

Mr. Gordon Wilson: Is the hon. Gentleman aware that in the Vote Office this morning copies of the Energy Bill were not yet available, but I understand that at least one copy is available to at least one hon. Member? Will the hon. Gentleman assure us that there will be no attempt to schedule the Bill for Second Reading until such time as other hon. Members have had an opportunity to study it?

Mr. Morris: I note what the hon. Gentleman has said. I will endeavour to see that copies of the Bill are available.

Several hon. Members: Several hon. Members rose——

Mr. Speaker: Order. We cannot go any further with this now.

Mr. Rost: On a point of order, Mr. Speaker. The Minister of State, Civil Service Department has just stated that the House is being inconvenienced. I put it to you that the matter is more serious than that. Tomorrow's business


is a debate on the EEC's energy policy, and it is impossible for hon. Members to debate the matter intelligently without having available to them copies of the Energy Bill, which was published over the weekend, which is apparently available in another place, and which was commented upon in the Press over the weekend. It is, therefore, a question not just of inconvenience but of the unavailability of essential documents reasonably in advance of a debate in the House.

Mr. Speaker: I am sure that those responsible for providing the papers heard what the hon. Member said, but it is not a matter for me.

Mr. Morris: Further to that point of order, Mr. Speaker. We shall be making efforts to ensure that copies of the Bill in an alternative form are made available to the House.

DEVELOPMENT LAND TAX BILL

Order for Second Reading read.

Mr. Speaker: May I inform the House that I have selected the amendment in the name of the Leader of the Opposition and her right hon. and hon. Friends?

3.41 p.m.

The Paymaster-General (Mr. Edmund Dell): I beg to move, That the Bill be now read a Second time.
I begin by emphasising that we are dealing with a tax. I quite understand why, on the Ways and Means Resolution, the Opposition found it simplest to repeat their speeches on the Community Land Act. But what we are discussing today is a tax, a tax which replaces the development gains charge, introduced by the Finance Act 1974, and which enables us to wind up the charge on first letting. I emphasise this because certain hon. Members did not seem to get the point during the debate on the Way and Means Resolution. I explained then why we considered the development gains charge inadequate as a means of taxing development value.
What we have here in this Bill is the structure of a tax which, whatever debate there may be about its rate and scope, constitutes a very much better framework for a tax on development value. During the debate on the Ways and Means Resolution I indicated that the Government's target date for bringing the development land tax into operation was 1st August 1976. I also indicated that to make that possible it would be necessary for the Bill to be out of Committee by the end of May. I am sure there must be adequate time in this House for a proper discussion of this long Bill but I must emphasise that any delay in bringing it into operation means a delay in replacing an unsatisfactory tax system by one carefully designed for the purpose. I take it that the Opposition would not wish to be responsible for any effect that had on industrial development and on the supply of land for housing.
The second point I must emphasise is that the vast majority of residential owner-occupiers will be unaffected by development land tax. Most private residences change hands at current use


value and no development land tax would in any event have been payable where that is so. The Development Land Tax Bill goes further, however, and any development value realised by an owner-occupier on the sale or development of his sole or main residence or of land up to one acre occupied with it as his garden or grounds is exempted from the tax. Exemption is not, however, given to someone who acquires a house with the intention of realising development value on a subsequent disposal. Obviously there have to be rules to determine what is genuine owner-occupation. However, even if the test is failed, development land tax would be charged only on any development value realised of more than £10,000.
Thirdly, the Bill embodies a number of changes following from the extensive consultations about it that we have had. The consultation included the publication by the Inland Revenue of a statement on 4th February 1975 which described the proposals in some detail. This was followed in August 1975 by the White Paper "Development Land Tax" which contained drafts of some of the more important clauses and schedules to the Bill. There has therefore been considerable opportunity for discussion of these proposals.
The most important change is that which I announced in answer to a Question from the hon. Member for Hornsey (Mr. Rossi), which was conveniently on the Order Paper, which increased the exemption to £10,000 and introduced a lower-rate tranche for a three-year period. There are other example of changes. For example, originally it was proposed that a husband and wife should share a single £5,000 exemption. We have decided that as they are treated separately for other development land tax purposes they should each have, in normal circumstances, their own exemption, that is £10,000 each.
Under the White Paper, only base B—110 per cent. of current use value—was to be available when there was a disposal of land acquired before 1st July 1948. This restriction was there because we believed that there would be genuine difficulty in establishing the cost of acquisition, which is relevant for both the other two bases of land acquired before then. We have been persuaded,

however, that there would be cases where this rule would operate harshly, and it has been dropped.
Again, it was orginally announced that, when development land tax was payable by instalments—for example, when the occasion of charge was the commencement of material development—those instalments should bear interest as from the date liability arose. In the light of the representations we have received, in most cases interest will now be charged only if the instalment itself is overdue.
Some concern has been expressed at the possible effect of DLT on house-builders' cash flow, because tax will be chargeable at the commencement of a project of material development—that is to say, before a builder starts to get in any return from his expenditure. I think that these fears have been exaggerated—for two reasons. First, in many cases builders will have had to pay a development value price for the land and little or no DLT will then arise from the development itself.
Second, although any tax liability arises on the deemed disposal at the start of development, payment will not be required at that time. The builder will be able to pay the tax by eight yearly or 16 half-yearly instalments, and the first instalment will not be due until 12 months after the project was begun. By that time the builder—even of a large development—is likely to have started to receive some cash benefit from his outlay, in the form of stage payments, deposits or the proceeds of sale of completed houses.
There has been another genuine fear about the charge on commencement. A developer may have specified a project and been assessed to DLT accordingly. Later he may find that because of unforeseen snags he can carry out only a more limited project than his original one. It would clearly be unfair if no account were taken of this change and he were charged to DLT as if he had developed as he had first intended. The Bill accordingly contains provision for an appropriate adjustment to be made when this happens.
The Opposition's reasoned amendment criticises our proposals because, it is alleged, they will in many cases impose tax liabilities before profits or even returns from development can be realised.


I take this to be a reference to the fact that DLT will be charged at the commencement of a project of material development. I have already explained why I believe that fears about cash flow have been exaggerated.
The amendment, in linking DLT to the profit realised from development, shows a misunderstanding of our proposals. DLT is not a tax on profits. It will not be charged on the purely entrepreneurial profit a builder may make by reason of his skill as a builder. That will be left to other taxes.
What DLT is concerned with is the increase in the value of land, which has been created not by any particular person but by the efforts of the community. It is this increase in value, this development value realised, which we believe ought in large measure to be returned to the community. In this sense development value is realised when a project is commenced. The very fact that the developer has commenced operations is an indication that he has turned the development potential of the land in question to account. I am surprised that the hon. Gentlemen opposite seem not to have grasped this point. It is implicit in their own idea of an infrastructure charge which would presumably be payable on development.

Mr. Arthur Jones: The right hon. Gentleman will of course recognise, as we all do, that it is bound to affect the selling value of the house, the terms of the market and so on. Inescapably, DLT will take its part there as an on-cost.

Mr. Dell: This is a matter that we shall have to discuss intensively, but I would ask the hon. Gentleman to remember that it is possible that an infrastructure charge, which I will discuss later and on which I imagine he will speak, is far more likely to have such an effect than DLT.
We also propose to make two changes which should help industrial development. Clause 19 already provides that the development land tax liability in respect of building or extending an industrial building is deferred until it is either sold or ceases to be used for industrial purposes.

Companies will therefore be free to carry out industrial developments on their own land without having to pay the tax for as long as they own and use the building. But it has been represented to us that this would discourage companies from financing the development by subsequently entering into a sale and lease back arrangement with an insurance company or pension fund since the tax liability would be triggered by that sale. Development gains charge operates in a similar way.
We therefore shall be proposing amendments to Clause 19 so that the deferred charge will not be triggered when there is a disposal by way of sale and lease back in the circumstances described in Section 491 of the Income and Corporation Taxes Act, 1970. In such cases the charge will arise if the owner subsequently leaves the property, or ceases to use it for a qualifying industrial purpose. This means that industrialists can now plan industrial investments in the knowledge that they can be financed by a sale and lease back after the commencement of the material development without triggering the development land tax charge on that development. This is another reason for preferring development land tax to development gains charge.
The other change will primarily benefit developers of industrial estates. As hon. Members will be aware, the cost of acquisition of an interest in land is, for the purpose of base A, increased by what is called the special addition. This addition is in recognition of the fact that the acquisition might have been financed at very high rates of interest. It has been represented to us that there ought to be an equivalent addition to any expenditure on relevant improvements which is taken into account under base A. This matter is of importance to industrial estate developers who may incur heavy expenditure on preparatory work before the development comes to fruition.
We agree there is justice in this. I therefore propose to bring forward amendments to the Bill which will allow expenditure on relevant improvements taken into account under base A to be increased in a way broadly corresponding to the special addition provided in the case of acquisition costs.
The Government have also been able to go a considerable way to meet the representations which the charities, including the Churches, have made since the publication of the original White Paper on the Community Land Scheme. As my right hon. Friend the Minister for Planning and Local Government made clear to the Committee then considering the Community Land Bill on 15th July last, when he and I announced certain special provisions, the Government accept that charities are in a unique position. Traditionally, many have provided services to the community that would otherwise have had to be provided by central or local government and that is the sole reason they are in being. The Government therefore then announced a comprehensive group of measures intended to meet as far as possible the difficulties which the original proposals might have caused for the charities but which kept within the principles of the scheme.
In the case of development land tax, there is a complete exemption under Clause 23 from the tax on the realisation of development value from an interest in land held by a charity on 12th September 1974, the date of issue of the original White Paper. In addition, development land tax will be deferred when a charity develops land acquired after that date for its own purposes. These provisions will mean that DLT will have little, if any, impact on their direct work. However, we have not felt able to exempt charities completely from the tax, as some would have liked. To do so would have allowed the charities to become privileged traders in land, so creating a two-price market.
Nor have we been able to accept the case for exempting pension funds. It has been argued that they, like charities, have been traditionally exempted from tax and ought for development land tax purposes to be treated in the same way as charities But the Government's view is that pension funds do not occupy the same unique position as charities, and that in their day-to-day operations they are closer to other financial institutions. It therefore seems reasonable that they should be treated in the same way as financial institutions.
But it is possible to over-state the implications of development land tax and the rest of the Community Land Scheme for the pension funds. Traditionally, they

are long-term investors in property. DLT will not impinge on their present investments if they continue to be held for income. Nor will it be levied when they refurbish or rebuild their existing properties within the so-called "Schedule 8 rights", which include a 10 per cent. tolerance.
The institutions, including the pension funds, already have much experience in financing new developments in association with local authorities. Under the Community Land Act, there will be expanding opportunities for this, and the first report of the Pilcher Committee has indicated a variety of ways of building on this past experience. Pension funds have not traditionally invested for the purpose of realising development value, and so making large windfall gains. As a recent well-publicised case has shown, there have been instances of this, but I must say that it does not seem unreasonable to me that they should pay DLT like anyone else on such large windfalls. The House will of course have to consider these matters, and others, with great care, and we shall naturally consider proposals for improvements in the legislation which are brought forward during the proceedings in this House.
One of the objectives of the Government's Community Land Scheme is to reduce the cost of land to local authorities, and we propose to do this by enabling authorities to buy land net of development land tax which the vendor will be liable to pay. There have been extensive discussions with the local authority associations about the form which the net-of-tax arrangements should take, and the Bill contains the basic provisions needed to implement the arrangements which, in the light of the discussions, we have decided to adopt.
In essence, the system will require authorities to make a deduction on account of the vendor's development land tax liability from the consideration they pay for land unless, as will often happen, it is apparent that there is unlikely to be any liability. When a deduction has to be made, the amount will if possible be agreed between the vendor and the Development Land Tax Office as approximating to the eventual liability. If no agreement has been reached, the authority will deduct an amount calculated by means of a formula. This is to avoid


the delays which might otherwise occur while liability to development land tax is assessed on an agreed basis. But, whatever the basis for the deduction, the amount deducted will be compared with the liability as finally agreed or determined and the balance will be repaid or collected as may be appropriate by the Development Land Tax office.
In order to cater for the various situations which may arise, more detailed rules will be needed than are at present included in the Bill. The Bill therefore authorises the Board of Inland Revenue to make regulations to supplement the statutory provisions. Any such regulations would be subject to annulment by resolution of this House. The use of regulations will provide desirable flexibility for the administration of the system which will cater for any practical problems which may arise for people selling land to authorities, for local authorities themselves or for the Revenue. On the other hand, I know that the House prefers taxation provisions to be confined as far as possible to primary legislation. I will therefore consider whether it will be possible to spell out more of the details of the net-of-tax arrangements in a schedule to the Bill and, if so, I will put down a suitable amendment for consideration at the Committee stage.

Mr. Michael Latham: May I ask the right hon. Gentleman to consider seriously whether he could do his utmost to see that any such regulations are made remotely comprehensible to the average citizen? The Bill and the 94-page explanatory booklet are virtually unintelligible to anyone other than an expert.

Mr. Dell: I am sorry to hear the hon. Gentleman's criticism. We have tried in the explanatory book to provide a comprehensible explanation of the Bill. I understand the difficulties and, of course, we must always try to do better in that respect.
I now turn to discuss the implications of the Development Land Tax Bill for the supply of land for private development. This will obviously involve some reference to the Opposition's alternative proposals for dealing with the land question so far as they can be identified. These alternative proposals have evidently been

in a state of flux over the years, and it is not clear that they have yet settled down. Perhaps we shall hear more about that today. I shall have to rely on what has already been said.
I argued in my speech on the Ways and Means Resolution that the present depression in the land market could not be laid at the door of the proposed development land tax. Many facts have contributed towards the present state of affairs, including the general economic climate and the excessive expectations of landowners based on the inflated prices that could have been obtained from selling land for development a few years ago.
Perhaps I should indicate how we see the supply of land for private development over the next few years. The White Paper on public expenditure gave figures for spending on the function of providing land for private development and estimates of the amount of land likely to be bought and sold in the next four years. The expenditure figures are on a net basis. They are calculated on the basis of an estimate of what authorities can expect to spend on land after any DLT liability has been deducted from market value. In addition, the figures for 1977–78 onwards reflect the fact that by then some new purchases will be financed out of disposal receipts. The total public expenditure for the next four years therefore represents a substantial commitment in terms of spending on land for private development.
I do not see how the Opposition can object to local authorities entering the market for land for private development in view of their own 1972 proposals in this respect. Despite their claim that the abolition of the Land Commission would encourage the bringing forward of land for development, they had, within two years, to ask local authorities to go into the business of buying land for private development, and they authorised the expenditure of £80 million for that purpose. They can hardly now argue that the provision for land purchase by local authorities for private development in the public expenditure White Paper is unreasonable.
By 1979–80, action under the Community Land Scheme should be supplying some 25 per cent. to 30 per cent. of the


land builders need, and acquisitions in that year should be running at the equivalent of two-thirds of the needs of private house builders. The Government's plans for spending under the Community Land Scheme therefore represent a substantial contribution towards the supply of land for private development.
However, throughout this period most land needed for private development will have to be brought into development through the normal market process. Private builders already hold stocks which should on average be adequate for two to three years. The development of this land can, generally speaking, go ahead without prior acquisition by local authorities. The development land tax provisions are framed in a way to avoid inhibiting ongoing development.
Thus, land held by builders as stock-in-trade on White Paper day, with planning permission on that date, will be exempt from development land tax. There is the special addition to base values in the early years to allow for the cost of holding land. Moreover, the arrangements for the first tranche to be charged at a lower rate for the first three years of the scheme should encourage the bringing forward of land. This tranche creates an incentive for the bringing forward of land in the period during which local authorities are building up their capacity to buy land for private development.
Now there is the question of the effect of development land tax on the supply of land for private development. I accept that any tax, at whatever level, even that suggested now by the Opposition, will have some effect on the willingness of owners to sell, but development land tax must be looked at as part of the overall Community Land Scheme. By contrast with the Opposition's proposals, our policy has a strong positive element in the duty of authorities to see that land needs are met.
As for the incentive to owners, the Royal Institution of Chartered Surveyors, whose publication "The Land Problem—A Fresh Approach" I have carefully studied, said that
In our view at least one third of the gain should remain with the landowners in order to encourage the release of land for development.
This is what will be achieved in a very large number of cases by the first tranche

at 66⅔ per cent. after the exemption of £10,000. No doubt it is the larger cases, with a development value above the limit of the first tranche, in which local authorities will be particularly active.

Mr. Tim Sainsbury: In "The Land Problem—A Fresh Approach" I think that the Institution was referring to the total burden of tax. Has the Paymaster-General not overlooked the burden of capital gains tax on the balance left to the vendor?

Mr. Dell: I do not think so because there are two aspects to this matter—development land tax, and capital gains tax which may be payable on the exempted amount. Overall I think that we have more or less met the views of the RICS on this point.
I was discussing the effect of the proposals on the supply of land if it were believed that the Opposition, should they be elected to office, would impose a rate of tax so much lower than is now proposed as to make it worth while hanging on in that desperate hope. The truth is that nobody can have the least reliance on what the Opposition would do in this matter. However I hope that they will today indicate their detailed intentions, despite my suspicion that whatever they say today might be changed tomorrow.
In an article in the February issue of National Builder the hon. Member for Aylesbury (Mr. Raison) said
We are committed to a fairer rate of tax on development gains and favour a measure to helps councils with the cost of infrastructure works.
It now turns out that the fairer rate of tax on development gains is 52 per cent. If we were to take this at face value it would mean that the tax on what the hon. Member for Hornsey the other night called "windfall gains" would be at the same level that companies pay on profits which they earn. This rate of tax, if that were all there were to it, would clearly be unacceptable to many members of the Opposition and could only be described as ludicrous. Thus the hon. Member for Melton (Mr. Latham) has suggested that the rate of tax should be 60 per cent., at which the right hon. Member for Crosby (Mr. Page) intervened to suggest that such a rate was too high. The right hon. Member for Worcester (Mr. Walker) has, I understand, suggested at a recent symposium that he thought it


should be the duty of Governments of any complexion to see that there was a margin of profit for actual development of land but also that most of the enhancement of the land value should be taken in some form of tax. He proposed doubling or trebling capital gains tax levels.
Moreover, this 52 per cent. is in strange contrast with Lord Barber's proposals for the tax on development gains announced on 17th December 1973. The hon. Member for Hornsey is now very scathing about Lord Barber's proposals. He said that
With hindsight it is fair to say that in those proposals we over-reacted to the situation".
That was some over-reaction if the rate of tax is now to be 52 per cent. In addition it is unclear whether this 52 per cent. is to be a standard charge or simply to be the highest rate of development gains charge.
The hon. Member for Hornsey also suggested that Lord Barber's proposals were highly tentative. The then Chancellor, he said, was open to receive representations, and modifications might have been made in answer to those representations. In a happy phrase he interrupted my hon. Friend the Minister of State—as reported at c. 532—to say
The hon. Gentleman's Government jumped in with big feet and picked up the cards on the table without looking at them too closely."—[Official Report, 25th February 1976; Vol. 906, c. 522 and 532].
I agree that we are well advised to look very closely indeed at any Opposition proposals, whether in the form of cards on the table or not. However those who care to look back to what Lord Barber actually said on 17th December 1973 will not find any indication that these were mere tentative proposals. Lord Barber stated firmly that tax at the new rates would apply to disposals immediately after the date of his statement, that is, from 18th December 1973. This is a further strong indication that his proposals were far from tentative.
Now the Opposition suggest that the appropriate rate of tax is 52 per cent. But it appears that there will be an infrastructure charge. The hon. Member for Hornsey said—as reported at col. 525—that developers should be "en-

couraged" to make contributions to infrastructure costs. This idea raises a lot of interesting questions, and I hope that we shall hear the answers to some of them today.
First, what on earth does "encouraged" mean? Are contributions to be purely voluntary or will there be some statutory basis? In 1973 the Opposition tried to have it both ways. In Command Paper 5280 of April 1973 "Widening The Choice: The Next Steps in Housing" they promised early legislation to strengthen the hands of local authorities in extracting contributions. But, in paragraph 24, they went on to say:
The Government believes … that the developer should be required to pay for those publicly provided services which make the development feasible
and they promised consultations to form the basis of provisions to be included in early legislation.
Are the Oppositoin still riding both horses, or only one? If they are now talking only about voluntary contributions they must know that the scope for authorities to get contributions from developers who paid high prices for land during the boom must be very small, and that their proposal is therefore purely a piece of window-dressing. Moreover, voluntary contributions look to me very like selling planning permission to the highest bidder.
The second major question is how large the contributions would be. The Opposition must tell the House—and builders and developers—what scale of charges they have in mind. Are they thinking of the 5 per cent. to 10 per cent. of site value figure advocated by the RICS? Have they worked out what that means in terms of annual yield?
We need to know what sort of charge is in mind before we can see how the Opposition's approach compares with ours in terms of its effect on land supply, for the House will appreciate that if builders have to pay infrastructure charges they will not be able to pay so much for land. No doubt the hon. Gentleman will tell us what the housebuilders think of his alternative proposals. I thought it interesting that, in the debate on 25th February, his hon. Friend the Member for Melton, who knows about the housebuilding industry, said nothing about infrastructure charges.

Mr. Graham Page: What effect will the Bill have on Section 52 agreements? This is just the type of matter which is settled between local authorities and developers in Section 52 agreements.

Mr. Dell: This is very different from the agreements to which the right hon. Gentleman referred. No doubt he will develop that point later.
The local authorities will also be interested to know what scale of charges is in mind. The hon. Member for Hornsey implied that infrastructure charges would bring greater benefits to local authorities than development land tax, though in his comparison he completely overlooked the fact that the development land tax arrangements will mean that authorities buy land more cheaply for their own use—for example for school sites—and that this benefit is quite independent of the 30 per cent. share of land account surpluses which would eventually be available to authorities. We shall presumably hear today the extent of the benefit intended to accrue to local authorities.
Whatever the Opposition's answers to these questions may be, they are still faced with this central problem. Effectively, an infrastructure charge is simply another tax. Presumably the Opposition will not be so naive as to deny that. Moreover, it is a tax payable by builders at the point of development. Strictly speaking, the effect ought to be passed on to landowners, because builders would pay less for their land; but there is no guarantee that the market would operate in that way. The effect could be simply to add to builders' costs. Surely DLT is fairer in that it bears directly on those who make the development gain and so are in a position to pay and because it ensures that there is no further liability on a person carrying out development if he has paid market value, or something near it, for the land.
The Opposition must really think through their alternative and bring out the implications before they are in a position to put it forward and argue that it is to be preferred—by builders, by local authorities, and from the point of view of land supply—to the Government's proposal.
The Opposition now have to show whether they are, in fact, sincere in their own advocacy of a tax on development value or whether they are running away from yet one more of the principles of policy which they adopted in office, so many of which they now regret and repudiate.

Mr. Michael Latham: Will the right hon. Gentleman give way?

Mr. Dell: No, I am about to finish.
I return to the basic principles of our proposals. There is a generally recognised need for a special form of taxation on development value. We believe that it is also generally accepted that development gains should be charged at higher than normal rates and that part of those gains should accrue to local communities. Development gains charge failed to meet these requirements because it was built on other taxes whose structure was designed for different purposes. By contrast, as I have emphasised, our proposals have been carefully designed, after detailed consultations, to meet these specific needs.
It has always been a major objective of the Labour Party to solve the land question which has been a continuing element in the political life of this country for over a century, and I am delighted to be moving the Second Reading of the Development Land Tax Bill which will make a substantial contribution to the settlement of the land question.
I commend the Bill to the House.

4.13 p.m.

Mr. Timothy Raison: I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:
this House, while accepting that increases of land values resulting from planning decisions should bear a special tax, nevertheless declines to give a Second Reading to a Bill which—

(a) imposes a levy at a rate which will serve only to inhibit the supply of land, and
(b) will in many cases impose tax liabilities before profits or even returns from development can be realised."

The Paymaster-General certainly had an easier passage today from his Back Benchers than he did last Wednesday night. There is only one present. I dare say that he relished this opportunity not to be barracked so hard. Even the hon.


Member for Bolsover (Mr. Skinner) was surprisingly silent.
The right hon. Gentleman spent the greater part of his speech dealing with the Conservative Party's repeal measure which will come in a year or so rather than the Bill before us. I found that puzzling. I should have thought that a Bill with 47 clauses and eight schedules required a fairly substantial explanation in itself.

Mr. Dell: I should like to be clear on what the hon. Gentleman is saying. I should not like something said in passing to be misinterpreted. Is the hon. Gentleman committing the Conservative Party to the repeal of this measure?

Mr. Raison: I shall explain our position during the course of my speech. We cannot accept the Government's land scheme as a whole. We believe that it has great objections in principle.
I want to mention the land scheme of which this tax Bill is a part. Since the October 1974 General Election the Government have been hooked on the fact that they rushed out a White Paper about land at that time which was not properly considered and which came up with a scheme which looks ever more disastrous with the passage of time.
It is true that the Government have made concessions during the passage of the Community Land Act and of the DLT Bill in an attempt to buy acceptance. In the Community Land Act there were many exemptions and exceptions. We have heard today from the right hon. Gentleman about some of the concessions which have already been made over the DLT. The fact remains, however, that the attempt to buy support for the scheme has failed and the gloomy predictions of its effects are already being justified. Those effects include the drying up of the land supply and of development generally to which the Paymaster-General referred. The situation regarding development in factories, offices and shops is already serious. The situation for housing is likely to be equally serious in a year or two years.

Mr. Stephen Ross: Is the hon. Gentleman saying that we need more vast office blocks? Are there not enough standing empty now?

Mr. Raison: The Government do not seem to have moved to take over Centre Point, which they are allowed to do under the Community Land Act. Industrial and commercial development is a vital part of this country's prosperity. If we get back to prosperity, we shall see these things grow again. The factory side is particularly important.
What has happened? I want to be fair to the Paymaster-General. On 25th February, in the debate on the Ways and Means Resolution, he said that he accepted
that the land market has been depressed recently "—
I think that he rather indicated that today—
but it would be quite wrong to lay the blame entirely or even in large part at the door of the proposed new tax."—[Official Report, 25th February 1976; Vol. 906, c. 517].
I accept that the existing development gains tax and the threatened development land tax are only part of the problem. However, I believe that they are a more substantial part of the problem than the right hon. Gentleman is prepared to admit.
My view is reinforced by the Pilcher Committee's Report on commercial property development. The Committee said:
The Government's land policy is not the immediate cause of the problems of the development industry at present, but it is an important additional source of uncertainty for the industry and for investors.
In other words, the scheme as a whole has helped to bring about the serious situation now facing us.
The Pilcher Committee coupled with tax policy the delays in planning procedures. I should like to make the point that the Government have been dilatory in their approach to the planning side. Their response to the Dobry Report was both very slow and inadequate when it came.
The Pilcher Committee made another important point when it said:
In bringing commercial development more into the public domain, there must inevitably be greater delay (and therefore cost) and other difficulties which hamper the speed and course of development.
Again, on the authority of that expert Committee, the Government's policies are delaying matters and adding to costs.
The respected correspondent Judy Hillman summed up this matter in The Guardian on 2nd December when she said:
The economic outlook for shop, office and factory development is so grim that within three years there is likely to be a virtual standstill.
Of course, the Government's overall handling of the economy is the major villain, but the Community Land Act, the tax uncertainty and the tax rate have all contributed greatly to this problem. In other words, the economic policy which the Paymaster-General sought to defend in vain last week in the public expenditure debate bears a very large part of the blame for our present situation. But the combination of the Community Land Act, the tax threat and the failure to get on with the planning problem has made matters much worse.

Mr. Dennis Skinner: I am intrigued to hear the hon. Gentleman bring in the question of public expenditure. It is a well-known fact that an increasing amount of money must be given by the central Government to local authorities in order for them to sustain the programmes which we want to see increased and which the Opposition want to see decreased. I find it strange that the hon. Gentleman, representing the Opposition, should be trying to reduce the amount of money which would otherwise be allocated to local authorities under this Bill, which we hope will become an Act, even though I should argue that the percentage take is not as high as was first suggested. How does the hon. Gentleman square the argument about the public expenditure programme with relieving local authorities of a sum of money which would otherwise be available under the Bill?

Mr. Raison: I think that the hon. Member labours under a widespread misapprehension, which has been fostered by the Government, that the proceeds from the development land tax find their way into the coffers of the local authorities. That is untrue. They find their way into the Exchequer. Many people thought that this 30-30-40 division, the consequences of the land scheme, had something to do with development land tax. That is not the case. This refers to any surplus which local authorities'

land accounts may virtually accumulate. I believe that the hon. Gentleman has got it wrong.
I was about to say that this problem applies also to housing. I suspect that my hon. Friend the Member for Melton (Mr. Latham) will talk about this later. I said earlier that the throwing up of land for housing is not yet a problem, but it will pose a very serious threat in the years from about 1978 to 1981. There is no doubt that the tax burden, or the threatened tax burden, is the major factor here. The proposed development land tax rates will continue to keep land off the market, except for very small packets of land. The House-Builders Federation has said that the end result of the scheme will be
a much smaller industry, producing perhaps 100,000 houses a year in the private sector".
Since the Public Expenditure White Paper shows that council house building will fall—I hope that the hon. Member for Bolsover has noticed this—even members of the Government must see that this is a very serious prospect.
The Government's land scheme is not only killing the land supply. It is also, as has been acknowledged by the Paymaster-General, very expensive for the public as well. I wonder whether people remember all the talk that we had a few months ago of how the scheme would be a great bonanza for the community—hence the name Community Land Act, I suppose. The hard facts have now been revealed by the Public Expenditure White Paper. The hard facts are that £312 million net is expected to be added to public expenditure over the next four years as a result of this measure. These figures apparently do not even include the additional cost of local government staff who will be taken on to operate the scheme. I admit that it is tempting to regard these projections as a bit speculative. Others may say that they are incredible. Nevertheless the Government are firmly committed to them, and the Paymaster-General repeated them today.
The Minister for Planning and Local Government made a speech on 1st March in which he is reported as having said that
the recent Public Expenditure Survey Committee figures on local authority acquisition and disposal of land had shown that implementation


of the community land scheme would be speedy.
How on earth one knows when this will happen I am not sure, but the Government are apparently adamant on this fact.
The Paymaster-General should remind himself that one of the ingredients of the Community Land Act is that it establishes that public ownership is in itself sufficient reason for taking over land. The Paymaster-General referred back to our position in earlier years. It is true that we accepted the possibility of local authority compulsory purchase of land for planning reasons, but this measure says that the local authorities can acquire land compulsorily simply because public ownership is in itself a good thing. This is a principle which we have always opposed very strongly.
I am not quite sure what is the status of the Public Expenditure White Paper after last week's events——

Mr. Skinner: It is in limbo.

Mr. Raison: The hon. Gentleman says that it is in limbo, which is a very charitable expression from him. I suppose that the White Paper is still meant to mean something.
There is another serious objection to the scheme, and I should have thought that this was an objection about which even Socialists would care a little. It is more and more apparent that the scheme is unlikely to do anything to help the inner city problems. It is increasingly clear that local authority financial benefit, such as it is, will come only from green field development where the gap between current use value and market value is likely to be substantial. This means that local authorities may be far less interested in the whole scheme in areas which have already been developed and which now need redevelopment. I stress that this shows that one of the great weaknesses in the land scheme is the conflict between the planning rôle of local authorities and the development rôle of local authorities. They are likely to point in different directions.
Finally, the scheme puts local government more and more into the position of doing deals, of having benefits to dispense even to private citizens. We all know that there is no perfect way for local govern-

ment to dispose of interests in this sort of sector. Auctions, open tender, and selective tender are all possible ways, but they all have serious snags. I believe that the answer is to minimise rather than maximise the area in which these problems are likely to arise.
There it is. The scheme as a whole is costly bureaucratic nonsense. The only beneficiaries are likely to be not the public but the highly-paid officials taken on to run it, plus those who mount expensive courses at universities and so on in order to try to explain its weird ramifications to those who try to operate it. The sad thing is that the planning objectives of the scheme could have been perfectly well achieved under the 1971 Act, while the recoupment of development gain could perfectly well be achieved on a basis broadly acceptable on all sides, if only the Government would forget about their dreams of public ownership and apply some common sense.
The question we have to consider today is whether this development land tax is capable of being the vehicle, or part of the vehicle, by which this objective can be achieved. Is this tax in its structure likely to prove acceptable, or is it wrong from beginning to end? There is no doubt that the present Bill is unacceptable fundamentally because of its basic 80 per cent. rate. There is also no doubt that if it is to be seen, which I imagine is the Government's intention—although the Paymaster-General was rather shy about this—as the first step in the direction of a move towards 100 per cent. confiscation of development gain, which is what the second appointed day in the Community Land Act envisages, our answer must be emphatically that this is wrong. That Draconian approach was tried before, in 1947. It failed then, and it will always fail. Total confiscation of the gain will never work.
I want to leave aside the question of the rate of tax, to which I shall return later. What about its structure otherwise? As the House knows, we on these Benches have accepted the principle of taxing betterment. We shall have to see the DLT in its final form before we reach a conclusive view on whether this is the right way to do it. We should like to avoid the chopping and changing of taxing betterment which has marked the post-war years. I have found a widespread


desire to come to some sort of agreed conclusion to this problem, and we on our side are absolutely genuine in wishing to work towards that objective. I hope that the Paymaster-General, who I believe is perfectly reasonable, will respond and see whether he can aim at the same thing.
I now wish to consider some of the specific features of the development land tax: first, deemed disposal, which is the liability to tax when one starts material development on one's own land. I understand the case for taxing betterment gains when one is about to develop one's own land. I can see the principle that lies behind that. I believe it is now fairly generally accepted that the first lettings tax has not proved a satisfactory way of doing this. But if we do accept this principle, we must be sure that it is operated in a tolerable way.
First, we want to look very closely at the provisions for deferring payment, to which the right hon. Gentleman referred and to which I shall return in a moment. Equally important, we want to examine critically the notion that one is taxed on a notional gain and that one has to pay the tax regardless of whether one realises part of that gain. There is, I agree, some merit in knowing what one will have to pay before one begins development. I can see that that has some convenience in some circumstances. But it also raises some problems.
On the question of deferment and of spreading the tax load over several years, what the Paymaster-General said was helpful. It is extraordinary how little publicity has been given to the whole question of deferment of tax arising from deemed disposal. In the many circulars and publications which have come out, there has been hardly any reference at all to this. We see buried in Schedule 8 what appears to be—the Paymaster-General has confirmed it—provision for spreading this over eight years.
All I would say about that now is that we welcome the fact that this has been confirmed, because many people in the business have not themselves been able clearly to realise what the position will be. In any event, I have no doubt that the procedure for deferment will have to be probed carefully in Committee if the Bill receives a Second Reading.
Second, what about the proposal that one is taxed or levied on a notional gain rather than on a realised gain? As I have said, I understand why the Paymaster-General has brought this principle forward, but it is no good bringing a principle forward unless it will work in practice. The right hon. Gentleman must recognise that this proposal could produce great hardship. It could produce bankruptcies. After all, no one can be sure what profit, if any, he will make on a development scheme.
We are not talking of a world where profits are safe and sure. We are talking about people who will always have to take some measure of risk, and deferment will still mean that in many cases the developer will have to start paying before the income stream is really under way. But what happens if there is no income, or only very little, coming in? This is a source of real anxiety.
The Paymaster-General pointed out that there is one year's delay between the date when development commences and the date when the first payment has to come. But that is not a long period from the initiation of development. It is not easy in that time to know whether one has any income stream flowing inwards, so to speak, in the space of one year from the initiation of development. I am sure that my hon. Friends will press that point hard, because it is of fundamental importance.
Moreover, it seems to me that the Government's scheme may well encourage the freebooter—it may well encourage the sort of person who would be prepared to take a chance and risk bankruptcy. In my view, the whole scheme is still in a form which is liable to deter the rather more cautious and responsible firms, again for the reason that they cannot be sure what will result. They face a tax liability established before they know whether they will make any profit out of the development.
I hope that the Government will listen sympathetically to the case for making genuine concessions when gains are either not realised in part or not realised at all. Otherwise the whole notion of the levy, which is what the Bill is about, will remain highly dubious.
As the right hon. Gentleman half recognised, there is a special problem here for


house builders. The House-Builders Federation makes the point that, while some tax on the land vendor's betterment gain may be reasonable, to impose development land tax on house builders means that their stock in trade is uniquely discriminated against, and they argue that not only has this not occurred in any other industry but it is the very opposite of the stock relief now being introduced into the main body of taxation for other industries. There is a special problem here for builders, and I hope that the Minister will acknowledge at least that.
That issue is part of a still more important question. Is it right in any case that there should be a special tax on those who are in the full-time business of developing and building? After all, their position is different from that of those who make what my hon. Friend the Member for Hornsey (Mr. Rossi) called windfall gains on land. There is a strong case for treating them under the ordinary company tax provisions, because the increase in land value which is being taxed is not for them just a matter of good luck; it is the result of the constant operation of their professional skill. They have to work at the business of increasing the value of land—it does not just come out of thin air—and theirs is a special position which must be acknowledged.
The next important principle in the Bill is the case for allowing local authorities to buy net of tax. Incidentally, I cannot but suspect that, if they do, the Treasury will probably dock their rate support grant or whatever we have in its place. However, I am not necessarily unsympathetic to the principle in itself, but here also we must have clarification.
It is now clear, as I said in response to the interjection by the hon. Member for Bolsover, that the 30-30-40 division under the Community Land Act has nothing to do with this particular measure. I hope, therefore, that this point at least will be made clear. It is very much at variance with the impression given, I believe, during the many months when the Community Land Bill was under review.
It is important also to realise that the local authorities themselves have considerable doubts about what the Government

propose here. I have had a letter from the Association of County Councils, which says:
The Association's detailed objections to the Government's proposals on this matter are as follows:

(1) If land is to be bought net of development land tax vendors will be discouraged from selling to local authorities by agreement because (a) they would have to bear the equivalent of tax very much earlier, and (b) would resent local authorities' involvement as tax collectors.
(2) The arguments against buying net of development land tax have, in fact, been intensified because it is now clear that local authorities will most often have to make arbitrary deductions of tax".

Later in the same letter, the Association makes the further point that
The argument that paying net of development land tax will help to reduce the problems of local authorities' cash flow is similarly now partly discredited because it is clear that (a) the deduction in many cases will be much less than the tax eventually due; and (b) the local authority will pay interest on the amount of tax deducted from the date it is deducted until the date when the tax would otherwise be due. The local authority, therefore, gains little advantage from earlier collection.
It is not only the Association of County Councils which is unhappy. The Association of District Councils is not happy about this aspect, and, equally, it is pressing strongly for the deferment of the Community Land Act until the DLT is in operation. That is another point on which the Government have a powerful case to answer. We shall have to look at this whole matter carefully, although, of course, the right answer is simply to scrap the whole of the Community Land Act system.
There are other major questions and doubts. For example, there will be an appalling problem of assessment under the scheme. All deemed disposals and purchases by the community will be based on the gap between an assumed market value and a base value. This will present a huge bureaucratic problem. There will have to be a mass of work to arrive at these settlements. Moreover, the difficulty will grow as the true market withers away. If the bulk of land is going through the local authorities, which is the eventual aim, there will not be a natural market, so how shall we know what the market value is?
There are genuine fears that district valuers will not be able to gauge the


market. It is argued at present—I do not know with what force—that they are tending to sanction unduly high payments for public purchases. If they continue to do that, it will mean excessively high rates of tax having to be paid under the DLT scheme. Moreover, it is apparent that a large proportion of assessments will have to go to the Lands Tribunal, which will thereby be swamped.
The next serious difficulty, which also was touched on by the Paymaster-General, is the inevitable consequence that pension funds and charities, and even nationalised industries, will all be seriously hit by the development land tax. For charities it is true that the so-called pre-White Paper land will not bear the tax, but the notion that post-White Paper land will bear a tax marks the end of our tradition of exempting charities from taxation, a tradition which goes back far into our history.
I have a communication here from the National Council of Social Service on this matter:
We are opposed to the proposal that post-White Paper day land of charities should be made liable to DLT, even if only in part—

(a) because such a provision, together with the provisions of the Communty Land Act, will make it difficult, as time passes, for charities to meet the challenge of new needs and finance their work for the community;
(b) because it marks the first break in the traditional exemption of charities from direct taxation, and sets a precedent which may have serious and far-reaching consequences;
(c) because charities themselves are, by definition, working for the community and are therefore a proper vehicle for the channelling of development value back to the community."

We shall press that point very strongly in Committee.
The problem of pension funds is particularly serious. They do not even have the concession which is given to charities on the pre-White-Paper-day land. It is a major error that they should be liable to DLT. As a nation we are trying in difficult circumstances to improve our pensions, and presumably trying to achieve some restraint in public expenditure on social security, which has gone ahead so fast. Therefore, to take this view about pension funds, which exist to relieve the State of the burden of looking after people in their retirement, seems to me perverse to a degree.
The National Association of Pension Funds made the point clearly and powerfully in a letter to the Minister of State, Treasury on 27th November last year. There appears to have been no concession since then. I shall not repeat what the Association said, because the Minister knows that it made the point that we are crippling the prospects of pension funds if we take this approach. They have invested heavily in property.
The next objection to the tax is its complexity. The DLT is supposedly in many ways a temporary tax, much of the operation of which will last only until the second appointed day. I am sure that the second appointed day will never arrive, but I suppose that under the Government's approach one must assume that it will.
This is an incredibly tangled Bill, consisting of 47 clauses, 166 pages and labyrinthine schedules. The Minister should at least recognise that the people who have to deal with it will not all be in a position to have highly-paid tax advisers on their staff. It does not make sense to burden industry with more and more complex rubbish of this kind.
There is also a surprising lack of information from the Government about this tax. I should have expected anyone introducing a tax to give some idea of the projected yield. I remember Chancellors of the Exchequer saying on Budget Day that they would put up income tax by, say, 3p and then telling us what that increase would raise. One cannot be sure what the yield will be, but, if the Government are prepared to go as far as they have in saying how much land will be acquired over the next five years or so under the Community Land Act, that at least gives some basis for an estimate of the return to the Exchequer that will result from the DLT. I hope that the Minister who replies will tell us what he expects the tax to raise and—perhaps equally significant—what he expects it to cost to collect.
There is a convention that Bills have an Explanatory Memorandum telling us about the public service manpower costs of legislation. For some reason that I do not understand—no doubt a Treasury privilege of some kind—that does not apply to this Bill. I suggest that the Minister remedies that deficiency tonight.
So far I have talked about our major objections to the Bill, or anyway our major doubts about it. I have not said that at this stage we are necessarily radically opposed to the whole principle. It needs far more scrutiny before we can come to a final view about it. But we are vehemently opposed to the proposed 80 per cent. rate of tax, which will prove wholly damaging. Worse still, the 80 per cent. is apparently only the prelude to a move to 100 per cent. When will the Labour Party learn that penal taxation achieves nothing in this area or any other?
The £10,000 exemption is an improvement on the previous one, but I do not think that it will be of any great significance. I am sure that the 66⅔ per cent. rate of exemption for gains up to £150,000 will prove unimportant. Anyway, it is limited to 1979. It will not be enough to stimulate the larger-scale housing development that we hope to see in the next few years. It is welcome. It is a concession. But I am sure that it is not important.
The 80 per cent. rate, however, will be lethal to house building and industrial recovery and will have its effect on employment. It also ignores the skill, effort and time that go into the business of creating a development gain. The maximum 83 per cent. under development gains tax has done enough damage already. As my hon. Friend the hon. Member for Hornsey said in the debate on the Ways and Means Resolution, we now recognise that it was a mistake, but the difference between the two sides is that we are prepared to learn from the mistake and the Government are not. What is needed is a figure way below that, one which will encourage people to bring land forward rather than to sit on it.
I conclude by reminding the House that last week we celebrated the two hundredth anniversary of the publication of "The Wealth of Nations". It was perhaps a little overshadowed by the poverty of Socialism. Nevertheless, it was an important celebration. I suggest that Ministers look at that book, particularly the section on the principles of taxation, from which I should like to read two short passages. The first is:
Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it.

The second is:
High taxes, sometimes by diminishing the consumption of the taxed commodities, and sometimes by encouraging smuggling,"—
for which, perhaps, we can read "evasion" in this context—
frequently afford a smaller revenue to Government than what might be drawn from more moderate taxes. When the diminution of revenue is the effect of the diminution of consumption there can be but one remedy, and that is the lowering of the tax.
A convenient tax and a lower tax—that is the essence of our amendment. I urge the House to support it.

4.45 p.m.

Mr. Arthur Blenkinsop: I apologise to the House for my late arrival but it was not my fault. Unfortunately, our various transport systems do not allow for some of the weather and other conditions that we have been experiencing. I regret that I was not in the Chamber to hear my right hon. Friend's introduction of the Bill or for much of the speech by the hon. Member for Aylesbury (Mr. Raison), although I heard enough of his remarks to be amazed at the attitude adopted by the Opposition to the Bill.
As one who took part in the discussions on the Community Land Act, I was fully aware of the Conservative Party's fundamental opposition to the whole principal of that measure and to some extent I welcomed it. But I understood that the Opposition were now converted to the need for a development land tax. I thought that they would not only welcome the Bill but would give it an easy passage, while criticising detailed elements of it, as any of us would in a measure of this complexity. I thought that the Opposition would say that the Bill was the right approach, although I expected them to maintain their doubts about the fundamental principles in the Community Land Act. Now, from the vigour of the attack levelled at the Bill by the Opposition, we gather that they are almost as fundamentally opposed to this Bill.
The hon. Member for Aylesbury uttered a few words of reason about the relative acceptability of parts of the proposals, but it must be clear to the country that the Conservative Party wants to return to Adam Smith. I shall read with the greatest interest the statements on policy and principle that stem from the Conservative


Party. I expect them to be clearly linked with Adam Smith's principles.
Whatever the Opposition may say about alterations to details within the Bill and their desire for a very much lower tax, basically they want to return to unsullied private enterprise and the right of full exploitation.

Mr. Raison: I do not think that the hon. Gentleman was present for very much of my speech. I reiterate that we accept the notion of taxing betterment. I am not sure whether Adam Smith would have approved of that. However, we must introduce sensible taxation. That is what we are trying to probe. Taxation must be at a rate which will not deter people from putting land on the market.

Mr. Blenkinsop: The hon. Gentleman has had a second attempt. I feel that he will need to make many more attempts to explain his position to the country. I believe that he and his party have clearly declared their support for a policy that has led to disaster for our national economy and to the utterly unjustified exploitation and profit-taking from which we have suffered.
It is astonishing to find the way in which the hon. Gentleman has rejected the approach made by his right hon. and hon. Friends at an earlier stage when they were faced with the same problems. As political realists, they recognised then that action had to be taken on a major scale to end a disastrous situation. It could well be said that some of our industrial tragedies have been due to the fact that land speculation was regarded as especially attractive when far more attention should have been paid to investment in industry. It is unhappy that we should have had such a backward-looking speech from an Opposition spokesman. That also applies to his recent intervention.
We all accept the difficulties and the complexity of the Bill. Measures that have sought to deal effectively with land values have always been extremely complicated. They could hardly be otherwise when we consider the long history of legislation that they must take account of. Surely that does not justify the approach that the Opposition intend to adopt.
My anxieties are different from those of the Opposition. I am somewhat disturbed

about the concessions that have been made since the intentions behind the Bill first became known. I understand that concessions were made to ensure a steady flow of land on to the market, but I am worried about the implications of the change in the rate of tax. It is clear that, far from placating the Opposition, they have made them greedy for further concessions. I hope that there will be no suggestions of that in future.
I felt that with the new proposals for the exemption of small areas we might have retained a rate of 80 per cent. for the remainder, as was originally intended. I am also concerned as to whether we have been able to carry the main local authorities with us in the discussions that have taken place about the Bill. I appreciate that it is a complex measure and that time is bound to be taken in discussions with the local authorities concerned. However, I understand that they have a number of matters to raise. No doubt they can be dealt with in Committee.
The hon. Member for Aylesbury referred to problems related to charities. I think he has raised an important matter of principle that we should consider further. I hold a view that is shared by many—namely, that when approaching new legislation which has a major impact upon our economy and which is meant to deal with major difficulties that have been faced in the past, it is not for us to try to make such legislation fit every item of the needs of charitable organisations. Surely it must be accepted that charities, whose work we welcome so much, must be prepared to adapt their organisations from time to time so as to meet the declared policies and views of the country and the Government of the day.
Surely it must be accepted that the main charitable effort must be within the confines that are broadly set by a legislative pattern. It was possible, alas, and recognised to be so, for great profits to be made from land transactions. Does that mean that every charity has a prescriptive right, not only temporarily but on a permanent basis, to enter into land speculation and to be involved in the racket of land speculation? I suppose that some Opposition Members would say that that is justified by the ends. Surely they would not be prepared to justify ends by means in that way.

Mr. Stephen Ross: I agree with the hon. Gentleman's thesis that charities should not be seen to be making vast gains from speculation, but does he agree that, unfortunately, that is the way in which they have been forced to raise their finances in recent years? Is he to put forward any proposals to replace that situation? This is a problem that must be faced if charities are to continue to do the good work that we all want them to undertake.

Mr. Blenkinsop: I accept the right of charities to use their legal powers. I accept that we are probably entitled to protect them in a period of transition. Once that period is over, however, they should accept the changed circumstances and remodel their operations accordingly. Otherwise there is grave danger—there have been examples of this—of charitable bodies being diverted into improper or unsuitable activities. They may find it necessary to employ staff to offer advice on investment policy and land acquisition policy to take advantage of the existing state of affairs. This could divert those charities from their declared purposes and objects. This is a serious matter.
As one who received the notice from the National Council of Social Service, and indeed as one who has been a good deal involved in many charities of one sort or another, I must make clear that it is by no means axiomatic that charities should be treated in a completely different way and encouraged to carry out practices which are to be illegal for other parts of the community.

Mr. Raison: If the Government make a concession on this point, will the hon. Gentleman consider voting against it?

Mr. Blenkinsop: I should first like to see what concession the Government make. I am merely stating the point that I do not believe it right for us to assume that charities have some right to a completely different set of laws, and concessions have to be made with great care. I have no objection to protecting their main purposes, but on an issue as fundamental as this—namely, land holding—charities must be encouraged to accept a new situation and to plan their campaigns and their work accordingly.
I take no pleasure in the fact that some charities have been able to acquire

land on which they have been able to make a profit. I believe it right in the long term that a local authority should have the right to determine how local resources should be used rather than that that should be done by groups of self-appointed people, as they often are, in our charities. I do not wish my words to be seen as an attack on the work of many excellent charities but rather as insisting that they should not be regarded as completely outside the law.
It seems from the correspondence I have received from the National Council of Social Service that they wish to be seen in a completely exclusive light, and I do not accept that argument.
The hon. Member for Aylesbury attacked the Community Land Act and the implications of that legislation on planning. I think that the hon. Gentleman lost a great deal in not taking part in the Committee stage of the Community Land Bill, as it then was. The issue of the relationship of the compulsory acquisition of land to the planning procedures rightly was a major matter for discussion. Because of the arguments deployed on both sides of the Committee and the representations made by the main bodies representing the planning profession, changes were made in that legislation.
The situation in regard to the compulsory acquisition of land is therefore much more satisfactory. The requirements are that proposals in respect of compulsory acquisition must relate to the broad planning proposals of the authority. Indeed, the major argument on the Community Land Act, and to a lesser extent on this Bill, which is an interim measure, can help towards what we have always called for—namely, positive planning against the kind of restrictive negative planning which, alas, most of our planning authorities have been forced into over the years, due largely to the kind of amending legislation brought in by Convervative Governments.
The main claim for the Community Land Act is that it seeks to release the abilities of our planning professions in the development of positive planning as well as helping to curb the speculation ramp which we have experienced in the past. If the Conservatives were ever to be re-elected, that could happen again. There is no reason to suggest that that


practice has gone for good if these relatively modest proposals are not accepted. It is tragic that the hon. Member for Aylesbury seeks to hark back to Adam Smith, and, indeed, seeks to tie his outlook and that of his party to a new Adam Smith. It is a pity that he paid so little attention to the discussions that took place in Committee on the principal legislation.
Therefore, having expressed my anxieties about modifications proposed by the Government, I welcome the Bill and hope that it will have a speedy passage.

5.7 p.m.

Sir Derek Walker-Smith: I begin by assuring the hon. Member for South Shields (Mr. Blenkinsop)—and indeed I am sure that he already knows this, because he has been in the House a long time—that for a very long time I personally have been an advocate of the recoupment of betterment in land values for the good of the community. The difficulty has always been to find a practical method of giving effect to this desirable principle.
What we have in this Bill is the latest instalment in a long saga of endeavour. It is the latest effort to solve a problem which has baffled Governments for nearly 50 years—the effort to recoup for the community the betterment which is its due without denying to the developer the reasonable fruits of his labours and, no less important, without denying to the community the products of desirable development.
The problem is easy to state, but difficult to solve. The White Paper spoke of the need
to restore to the community the increase in the value of land arising from its efforts".
The language, at an interval of 30 years or more, was reminiscent of the principle as stated in the original Uthwatt Report. But how to measure betterment and how to relate its recovery to development has proved a difficult, and so far an impossible, task.
Governments and experts have ventured forth in a variety of ways only to be defeated either by the practicalities of the matter or by the reaction and resistance of the public. In 1932, 1947 and 1967 attempts were made to deal with the problem and they represent a long and continuous record of failure to solve the problem.
It would be nice to be able to say that at last a fair, practical and equitable solution was in sight. It would be nice not only because of the inherent importance of the principle and the desire to give practical effect to it, but because the Government have in this case been ready to extend the principle of consultation and, I understand, to listen to the representations of persons and interests who will be involved in the success or failure of the measure. Nevertheless, I believe that in the form in which it is, the Bill is more likely to continue than to correct the record of failure.
The Bill fails to some extent on the basic tests by which these matters have to be judged. There are three main tests. First, there is the test of fairness, that such a tax should be equitable in its incidence. Secondly, there is the test of practicality, that it should be effective for dealing with the problems without giving rise to offsetting disadvantages which may outweigh the advantage it seeks to achieve. Thirdly, there is the principle of clarity, that such a measure should be drafted, if not with simplicity—and I do not suggest that, because I am a realist and I know that in so complex a matter we cannot expect a simple measure—with clarity and precision. It should be capable of operation without imposing too heavy a logistical load on the resources of the nation.
Unfortunately the Bill fails to some extent on all these major tests. Ideally, the equitable incidence of development land tax would follow a precise analysis of the betterment or development value and an apportionment of the tax to reflect this analysis, the community-created value accruing to the community and the developer-created value resting with him.
That would involve, first, an apportionment of the value represented by the provision of services and infrastructure between those provided by public authorities and estate roads, services and the like provided by the developer. It would not end there on the ideal solution, because we have also to give effect to what Uthwatt called the elements of shifting and floating value, that is, the additional value which comes upon the land not because of any effort or physical work by the developer, but simple because the shift has gone in that direction, either because of people building elsewhere or,


nowadays, because of the much tighter planning control and zoning than existed in the days of Uthwatt.
Those elements are more important now than they were at the time of Uthwatt and they are elements which make it extremely difficult, as I readily concede, to apply the ideal and logical solution of the apportionment of betterment in this way. Although the definitions of base value and current use value in the Bill are perhaps more sophisticated than in previous efforts, they still fall short of this ultimate analysis.
I do not complain of that. They fall back on the rough and ready method of a standard percentage. This is an empirical approach. We have to judge the percentage not only by the theoretical assessment of betterment, but by practical considerations. Figures of 100 per cent., 80 per cent., 66⅔ per cent., 52 per cent. are matters of degree only. They have to be fixed not only by reference to the desirable objective of creaming off speculative gains—although these are rather a thing of the past in existing circumstances—but by the impact on desirable and socially useful development.
When we consider what the effect will be in practice, the logic of the matter suggests and experience confirms what that effect will and inevitably must be. It will diminish the availability of land. It will reduce the volume in particular of house building and it will raise the price of houses to the purchaser. That must be so. Shortage of land due to the disincentive imposed upon the vendor by a high rate of tax may, according to the House-Builders Federation, depress production in the private sector to about 100,000 houses a year by the end of the decade, although the industry is technically capable of building more than 200,000.
But this will not depress demand, at any rate not to anything like a proportionate extent, because of people's deep-rooted instinctive preference for home ownership. Therefore, by the ineradicable effect of the ratio of supply and demand, the price to the consumer will rise and the builder will be able to pass on, as he did with the development charges years ago, the tax to the house purchasers. House purchasers constitute

a substantial section of the community. In their case the effect will be the exact opposite of the benevolent intention of the Bill. Instead of conferring the benefit by recoupment, it will impose a penalty of higher price.
These are the effects of a percentage tax fixed arbitrarily at a high level. Of course, they are aggravated by the deemed disposal procedures of Clause 2, which again will add to the costs of the genuine developer and therefore stimulate his wish to pass the burden, or at any rate some of it, to the purchaser. Because the deemed disposal procedure levies development tax at the start of development—although payable by instalments—it introduces the concept of the taxation of development as such rather than the taxation of development gains.
That is not in essence a novel approach. It is an attempt to resurrect a failure of the past. It is a repetition of the unsuccessful and unlamented Case C of the betterment levy under the Land Commission Act 1967. Under Case C the chargeable act or event occurred when the project of material development was begun. But Case C did not work out and has long been left in limbo until reflected once more in the deemed disposal procedure.
The deemed disposal procedure will make the genuine developer, house-builders and otherwise, liable to individual tax on individual projects. It will isolate a gain in the value of what constitutes a developer's stock in trade from his total operating profits, thereby departing from the normal tax principles. Again, with the contraction of supply in relation to the demand, the developer will be favourably placed to pass his loss on to the purchaser.
Parenthetically, I should like to reinforce what my hon. Friend the Member for Aylesbury (Mr. Raison) said about the pension funds, which have a substantial stake in development by way of providing finance. As the Bill stands, they will be liable to the tax, thus constituting, as I understand it, a departure from the 50-year-old principle whereby pension funds are immune from tax on their investment and capital gains. I mention this point not only because of the potential effect on millions of citizens and constituents of hon. Members to which my hon. Friend so eloquently referred—those


for whose benefit the funds are held and operated—but because, in the planning area, of the adverse effect it may have on the prospects for urban renewal in the decayed areas of our cities, renewal in which pension funds plays a considerable part.
I come now to the question of complexity to which my hon. Friend so powerfully referred. The complexity of this Bill speaks for itself. On the appointed day in 1948, when development charge was introduced, I remember observing that those of us who were professionally concerned, for our sins, with those matters could forgo the delights of acrostics, crossword puzzles and the like because we should get all the intellectual gymnastics we needed in working out the problems of development charges under the 1947 Act. So it was.
By the time that the betterment levy was introduced in 1967 I felt that things had gone too far. It was no longer a subject for jesting and I sent out for a supply of wet towels and looked anxiously at my insurance premium against professional negligence in case I had missed some small print in one of the innumerable schedules interrelating the matters in the 1967 Act. I can only say, in the Wordsworthian phrase, that this Bill gives rise to
Thoughts that do often lie too deep for tears".

Mr. Dell: The right hon. and learned Gentleman said that he was in favour of the principle of a tax on betterment. We are in the unfortunate position of not having any Conservative legislation introduced in an attempt to deal with this problem to look at as a model which the right hon. and learned Gentleman would have us follow. Although he has made one or two pleasant jokes, he does not seem to be contributing to the discussion of the way in which the principle which he supports should be implemented.

Sir D. Walker-Smith: I do not think the right hon. Gentleman was listening with his customary attention. I began by giving an analysis of how one would work out the ideal system of recoupment of betterment. I do not wish to repeat all that I said, because perhaps other hon. Members did not share the uncharacteristic inattention of the right hon.

Gentleman and might have followed the point more closely than he did.
I went on to say that, if one was not to do that, one would be involved in a test of practicalities in which there was no ideally optimum way of dealing with it: one had to have regard to the effects on desirable development and other considerations. I said that the deemed disposal procedures would lead to difficulties, that the percentages were too high, and that something simpler and smaller was required if we were to follow that pragmatic basis.
The extreme complexity of the Bill will be another powerful factor in diverting the energy of many people from production and administration to considerations and to calculations of tax at a time when the country cannot afford such an unrewarding divergence of effort. Although some complexity is inherent in such a measure, there are two circumstances today which make the price of complexity less worth paying than it would have been earlier. The first is that much of the complexity derives from the interrelation of the tax with other taxes. There is nothing new in that: it was so under the Land Commission Act 1967, with the interrelation of the betterment levy with capital gains tax. One of the cardinal mistakes made then was to introduce the betterment levy before there was any practical experience of the capital gains tax, which had been introduced in the Finance Act only two years before.
Now the situation is greatly aggravated because there are so many more interrelated taxes than there were in 1967, as we can see from the melancholy catalogue in Clause 33(1). Clauses 33 to 37 and the 30 pages of the Sixth Schedule are eloquent testimony of the incredible complexity of the pattern put before us. Yet, although this consideration made it far more complex, the advent of capital gains tax—which makes a specific development land tax more complex and difficult—also makes recoupment of betterment as such less urgent and compelling than it was in the days of Uthwatt, because capital gains are being taxed.
Secondly, this vastly complex enactment is, of its nature, temporary or interim, or is intended to be, pending the second appointed day of the Community Land Act, if that arrives at any date prior to the Greek kalends. But,


in addition, the terms and content of much of the Bill derive in no small measure from a situation which no longer obtains.
Three years ago the hectic profusion of planning applications was threatening to overwhelm the whole apparatus of planning control, and the profits made in some property businesses were causing wide disquiet about whether the public interest was being sufficiently safeguarded. But that is the situation of yesterday. Now the situation is different, as the City pages of the Press daily inform us. Therefore, to some extent, the Government are looking back to a situation which has gone, or, in Mr. Macmillan's pleasant phrase on another occasion, they are looking up their trains in last year's Bradshaw.
I conclude, more in sorrow than in anger because of my long interest in the subject matter of the Bill, that the Bill, especially with its inherent disadvantage of being a pacemaker for the Community Land Act, is not likely to provide the ultimate solution for this long deferred problem. The search for the optimum solution will have to be continued, and the ultimate solution will have to await the presentation in due time of another Bill by another Government.

5.26 p.m.

Dr. Colin Phipps: It would be less than frank of me to suggest that I was anxious to take part in this debate, but, when one of my Whips was kind enough to approach me a quarter of an hour ago to tell me that if I were to enter the Chamber I should be likely to be called, I was extremely pleased because, like the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith), I have had a long-time interest in ensuring that development gains were properly taxed and properly treated. My initial reluctance to take part in the debate was due more to the feeling that the crush on the Government Benches among Members wishing to speak on the Bill was so great that there would have been no point in sending in my name rather than unwillingness to back the measure.
The right hon. and learned Member for Hertfordshire, East was right to take as his starting point the three principal aspects of fairness, practicability and

clarity. It is and has been most important to distinguish between the three essential elements in the development process, namely, the owners of land, the developers of land and the community in which the land is developed. The right hon. and learned Gentleman spoke at great length about the developers. He went so far as to say that for developers speculative gains were a thing of the past. Possibly that is true for many developers. It certainly is not true for the owners of land.
By and large, the people who have made the largest gains out of land in recent years have been the owners of land. Such people, with agricultural land, in particular, in hand at agricutural prices, have been able to obtain planning permission for perhaps eight or 10 houses per acre and have suddenly seen land which was worth between £500 and £1,000 an acre become worth 10 times and some-limes even 30 times as much.
It is completely outside our existing tax structure to tax equitably a capital gain accruing to the owner of land which attracts planning permission. At the moment he is taxed largely on the basis of capital gains. It is even unfair from the point of view of the community that he should be taxed on the basis suggested by the Government. This has seemed, if anything, to be less than adequate in the manner in which it taxes the ownership of land, but it is a start in the right direction which, I should have thought, hon. Members opposite would have been among the first to applaud.
We have reached the stage where obscene profits are made by owners on the stroke of a pen which gives planning permission, though the owners have done very little and certainly nothing like as much as developers who give a real service to the community. The community also helps developers by providing many of the services which make a development possible. Developers and the community have worked together for many years producing proper developments in our towns and cities. But this has nothing to do with the owner, who merely sits back and acquires vast wealth when a council committee decides that housing or other development may take place on his land.

Mr. Victor Goodhew: As the speculative aspect is the driving


force behind the hon. Gentleman's desire to tax these people, would he also think about the few strokes of a pen on a football coupon by which a person can make a vast profit by guessing the right results, as he contributes nothing to providing homes or anything else for the people?

Dr. Phipps: I take the hon. Gentleman's point. When I was living in Venezuela a few years ago, there was a famous area in Maracaibo known as Millionaires' Row because everybody there was an oil millionaire, or something similar. The parents of a friend of mine lived there and were regarded as the only people who had come by their money honestly. They won it in the national lottery.
The right hon. and learned Member for Hertfordshire, East said that there would be a diminishing amount of land coming on to the market. He is probably right, but I do not regard that as a disadvantage. If agricultural land is held at agricultural value and the owner does not have the opportunity of a great increase in its value, the incentive to put it on the market will be diminished.
I welcome this. We are losing between 50,000 and 80,000 acres of prime agricultural land every year to housing development. It is scandalous that we are losing first-class acreage to development merely because of the greed of land owners when we have, as in my constituency, acres of derelict land which, for a fraction of the profits made by giving planning permission for agricultural land, could be turned into first-class land for housing.

Mr. Nick Budgen: The hon. Gentleman is making an important point. Does he realise that the incentive in the Government's land scheme is towards developing green field sites, which are to be cheap, and not the areas of our inner cities on which he and the rest of the House would like to see development?

Dr. Phipps: I am grateful to the hon. Gentleman for bringing up that point. Last year, together with the hon. Member for Hornsey (Mr. Rossi) I conducted a seminar for the Estates Times before an audience largely composed of property developers and local government officers. This point was raised repeatedly and I was struck by the fact that the local

government officers did not read the Community Land Bill as an open invitation to rush into the green belt, but merely considered that it gave them the opportunity, where there were great difficulties in putting together proper development for the community, to get hold of pieces of important land.
The reluctance of agricultural land owners to make their land available can do nothing but good. If we can turn our attention to the inner urban areas where there is derelict land and save 50,000 or 80,000 acres of prime agricultural land every year, we shall be doing an inestimable service to the community. Marginal land as good as that which normally surrounds our cities costs £200 to £300 per acre and one still does not get land as good as the agricultural land now being used for building. Far from being disheartened by this part of the Bill, I think it provides an incentive for us to change the direction in which we look for building land.
The right hon. and learned Member for Hertfordshire, East suggested that the tax was a splendid idea which ought to be implemented, but that the legislation was so complex and difficult that we should drop the scheme. I remember another occasion when I was fortunate enough to catch Mr. Speaker's eye—indeed, I was the only hon. Member on this side of the House who wanted to do so—in the debate on the petroleum revenue tax. The Bill introducing that tax was even thicker than this and was equally complex. However, the rapidity with which the oil industry acquired an expertise on the Bill was startling. Far from regarding it as a measure which was extremely difficult to understand, or which would deprive the industry of its freedom to operate, I understand that one very large oil company has been trying to persuade the Australian Government to adopt the Bill almost in its entirety, which is a great compliment to my right hon. Friend the Paymaster-General.

Mr. Dell: My hon. Friend will remember that I had to spend hours explaining the Bill to the oil companies.

Dr. Phipps: My right hon. Friend's powers of explanation are legendary. I have no doubt that when he applies them to the development land tax, it will


become equally clear and acceptable to land developers.
Hon. Members opposite cannot say that just because a measure is complicated, it must not be brought in. We passed the principle of a development tax when we passed the Community Land Act. This Bill gives ample body to the tax.
It has to be a complex measure, but one hopes that when people understand it better, it will be simplified. However, I do not see how we could have brought in a measure on a matter as complex as this without its being lengthy and difficult and without people having to take time to study and understand it.
The need for a tax of this kind has been recognised for many years. This is our opportunity to introduce it. Instead of carping that it is not perfect, we should vote for it today and try to ensure that in future it is simplified so that everybody can understand and apply it easily.

5.38 p.m.

Mr. Arthur Jones: I am sure that the hon. Member for Dudley, West (Dr. Phipps) has reflected the widespread concern in this House and elsewhere about the development of our worn-out city centres. This is a subject of growing concern in many of our great cities and little seems to be done to develop even those sites owned by local authorities.
This Bill does nothing to help in that respect. It seems to be essentially directed to bringing forward green field sites for development, and that is where the interests of developers and builders lie. So much of our city centres is controlled in planning terms by local authorities with their own redevelopment plans, however tardy they may be.

Dr. Phipps: I was not arguing that the Bill had been brought forward for the specific purpose of redeveloping our city centres of derelict land. I was arguing that the effect of the Bill upon the holders of agricultural land was such as to induce in them a reluctance to sell and that reluctance pointed developers towards city centres and derelict land.

Mr. Jones: I wish that I could share the hon. Gentleman's view. It would be an encouraging feature of the Bill if one

could persuade oneself that that were true, but I have grave doubts in view of the implications to which I have briefly referred.
I wish to reflect the concern of the agricultural industry about the terms of the Bill. For the farmer and the agriculturalist who produce food the loss of land is a serious matter. It challenges his stock-in-trade which he has been concerned to develop and use to secure the highest possible agricultural output.
The National Farmers Union, speaking for the industry—the largest industry in the country, with the largest turnover—emphasises that the farmer is concerned about the effects of the Bill on the carrying on of his business. When a farmer's land goes for development, he is usually faced with the problem of reinstating the original profitability of his activities. I have seen many examples of that. It is, therefore, necessary to protect the special position of farmers and growers against the development land tax, which shows every prospect of draining further capital from the industry at a time when maximum capital investment is needed.
I welcome what was said in this respect by my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith). He emphasised that the development land tax was a yet further tax and a complication in terms of capital gains tax and capital transfer tax, one of which would be a charge against the transfer of land at a higher value than its original cost. My right hon. and learned Friend emphasised the dangers of the development land tax for the farming industry.
The National Farmers Union suggests that a high rate of tax is a strong deterrent to farmers who might otherwise be willing to sell their land and leaves them with insufficient funds for replacement. Special concessions for the farming industry have been recognised by successive Governments. The NFU proposes that the first £20,000 slice of development value should be exempt from the tax. That would achieve the desirable effect of reducing the administrative costs both of the Inland Revenue and of farmers and their professional advisers. It would also encourage farmers to bring forward their land for sale. The need for special relief for agriculture has already been recognised in other forms


of capital taxation. In particular, the current development gains tax gives relief on for replacement of assets and retirement.
When a farmer or grower gives up land or buildings for development, his main concern is to maintain the viability of his business. In common justice, he should be left with sufficient available capital to cover the reasonable costs at present-day prices of reinstating his business. The roll-over relief of capital gains tax, which was carried into the development gains tax, recognised the need to provide funds for the replacement of assets, and a similar provision should be introduced into the development land tax. That is particularly important when an owner-occupier in the farming industry reaches retirement age.
The Paymaster-General, referring to the availability of land, told us that by 1979–80 the proposals under the Bill and the Community Land Act would make available between 25 per cent. and 30 per cent. of the annual land requirement. Figures are set out for the year 1979–80 showing the total acquisition in terms of acres for the four years from 1976 and the total disposals in acres for the latter three years of that period. Those figures cannot be other than speculative. The figure of 1,500 acres to be acquired during the next financial year is very small spread across the United Kingdom. Estimates should be made but there is little to substantiate the figures that the Government have put forward for consideration. There is a lack of recognition of what the private sector of the industry has to contribute.
Taking the first two years of the scheme, 1976–78, the Government have in mind the release of only 400 acres to private developers. That represents considerably less than 1 per cent. of the needs of the house building industry, which is about 150,000 houses each year at the assumed rate of production. During the next two years, therefore, the vast bulk of land for house building would have to be found in the market.
In terms of the assessment of land values, because of the Community Land Act and this Bill, the day cannot be far distant when district valuers will have inadequate evidence upon which to base their assessment of values. The price

of land will then have to be set by the district valuers, perhaps with the aid of the local authorities concerned. I do not see how in the almost immediate future market values can be determined by sale and purchase. We are moving rapidly to the position when land values have to be set by the local authorities who own it.
I have an interest in a building company. The only land it has for development is that which it acquired from a local authority. The local authority set the price. There was no question of a negotiated figure. The local authority said that so many acres of land could be made available to builders at a fixed price—£27,000 an acre for land ripe for development. That is an indication of how we are moving towards the day when values will be set by the local authority, and we are witnessing the rapid evaporation of the free market in land.
In attempting to acquire land over the past two years, housebuilders have found that the net yield to land owners has been insufficient to persuade them to sell land for house building. That restriction leads to uncertainty in the land market and a restriction on the level of value of new houses being built, while the prices of second-hand houses are not increasing as much as the cost of new development. All this is a serious retarding factor in house building.
The net yield factor is the result of two main decisions. First, the rate of tax has greatly reduced the value of land in the context of the unpredictability of house prices on the completion of building work. Builders have been unable to do anything to bring about any reduction in the price of land by offering the vendors more, because in the same period they have been caught between a 50 per cent. increase in construction costs in two years and a rise in mortgage prices for houses of 20 per cent. in the same two years—7 per cent. in the past year. Given the state of the economy, particularly pay restraint and the mortgage stabilisation policy, the builders see no immediate possibility of increased prices for housing whilst their material and labour costs continue to rise.
It is likely, therefore, that the price builders can pay for land will not increase in the immediate future. Therefore, if


the net yield to the land owner is determined by the price he will receive sub-tax, it follows that low prices with substantial taxation inevitably lead to the land owner being left with very low net yield. The Government can do nothing about the price of land, but they can change the rate of taxation, which they already have.
The advocacy from the building industry is that there should be a reconsideration of the tax and a concession to the realities of the situation facing the industry. The building industry is in difficulties, and owner-occupation is the known preference of the overwhelming majority of the population. The housing finance review is expected to conclude that the advantages of extending owner-occupation are overwhelming to the Treasury, so the measures proposed in this Bill appear to be contradictory and retrograde.
In the short term the pressure of demand will exceed the capacity of the industry to meet it and another explosion in house prices may soon follow, followed this time not by speculation but by a shortage of land created by the Bill. I hope that in Committee there will be reconsideration of a large number of the Bill's proposals.

5.54 p.m.

Mr. Gwilym Roberts: Like my hon. Friend the Member for Dudley, West (Dr. Phipps), I have taken an interest in this matter for many years, for it is an important part of the policy of the Labour movement. Nevertheless, I was surprised that I could so easily catch your eye, Mr. Speaker, and I certainly welcome the opportunity to make a small contribution.
The hon. Member for Daventry (Mr. Jones) made an important point about owner-occupation. We should not get lost in the idea that the vast majority of people want owner-occupation as such. For many years, people have been guided by the media and by hon. Members opposite and to some extent my hon. Friends into believing that there is something special about owner-occupation. I accept that for complex reasons many people look to home ownership, but we must never forget that for a large section of the

population it is financially impossible. We on this side must never forget the responsibility and value of the work done by local authorities, which provide accommodation for such people, and we all agree that that situation will be with us for a long time to come.
My hon. Friend the Member for Dudley, West said that there was something obscene about some of the profit made from land. I agree. There is something particularly obscene about this sort of profit, because nothing has been contributed by the ownership. In any case, ownership in individuals is largely a matter of chance. If one is honest about it, one must admit that in some cases the ownership is because some remote male ancestor fought in a certain battle, or a remote female ancestor slept in a certain bed. That is the basis on which much ownership of the land is based.
Nor do I believe the argument that the Bill will make it more difficult to acquire land. The Bill must be regarded as part of a package. Other parts of the package are the Community Land Act and the steps to make more land available for development. In addition, the Labour movement is considering the possibility of the payment of capital transfer tax in certain circumstances by the giving up of land to the community. It may well be that the short-term problems we face now of land development will be solved in the longer term by moving more and more land into public ownership. Many of us would welcome a move in that direction.
I am surprised by the consternation shown by the Opposition about this matter. There is nothing new about these proposals. They were in Labour's 1974 manifesto, when it was made clear that there would be a heavy tax to end land speculation by property companies. The White Paper of September 1974 talked in terms of an 80 per cent. land tax. Perhaps unfortunately, my right hon. Friend has recently made some concessions by reducing the level to 66⅔ per cent. I am sure that there are good reasons for that, although some of us regret it.
The right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith) referred to the complexities of these proposals. Those of us who deal with other areas of taxation know what


difficulties tax complexities can bring. The Development Land Tax Office is expected to employ 350 people at Middlesbrough. The right hon. and learned Gentleman said that the Bill would thereby move people from productive to non-productive employment. Many of us are anxious about this tendency, which affects countries throughout the Western world and Eastern Europe. But the Bill will make land speculation less profitable, which could result in more resources being transferred from investment in land—we have all been concerned about the level of speculation and investment in land—to industrial investment. So the Bill could help to reverse this movement.
The Bill is only a small part of a larger package which the Labour Government are introducing, but it is an essential step towards achieving our aim of bringing development land into community ownership. Conservative Members have talked of the problems of the developers and land owners, but the greatest need is that of the community. It is that need which this Bill in some part meets.

6.5 p.m.

Mr. Tim Sainsbury: I must start by declaring an interest as director and shareholder of companies, both industrial and commercial, whose property interests will be affected by the Bill, and as a farmer whose land, I hope, will in no way be affected.
I congratulate the hon. Member for Cannock (Mr. Roberts) on the vigour, if not the content, of his impromptu performance. He gave the impression, I hope unintentionally, that for him home ownership took second place to living in a council house.

Mr. Gwilym Roberts: I think that anyone who wants to own his own home should be able to do so. But, unfortunately, many people do not have enough money. Therefore, there is a responsibility on local authorities, and most Labour authorities face up to it, to provide houses for rent.

Mr. Sainsbury: I am grateful to the hon. Gentleman for confirming my belief that he favours home ownership and I am sure that he shares my desire to bring it within the reach of more people. But I am sure that he would not like any legislation to put obstacles in the way of

the production of homes for sale so as to make it easier to produce council homes for rent. Those two concepts should be kept on at least an even basis.
The hon. Member also referred to the obscene profits which are frequently mentioned in a discussion of this subject, but he made the common misapprehension of Labour Members by confusing speculation with development. At one point, indeed, he talked of "speculative development". These are two separate activities. Land speculation is relatively unusual, but development of land is important, for industry, for commerce and above all, for the production of all types of homes. Anything which makes it more difficult is against the interests of the community.
As the hon. Gentleman said, it is clear that we are concerned with a package of measures. The first was the Community Land Act, a piece of legislation which is totally unacceptable to anyone who does not believe that nationalisation and centralised State planning are the only answers to any problem. The Conservative Party will get that Act off the statute book as soon as possible.
The second part of the package is this Bill. There were some doubts at one time about its parentage, but the absence throughout this debate of any spokesman of the Department of the Environment makes it clear that the Treasury bears full responsibility upon its broad shoulders. I suppose that we could conclude that the Treasury already stands charged with so many misdemeanours that to ask the court to take into consideration the wrecking of the market in land and the destruction of the home-building programme will not greatly increase its sentence.
It is sad, however, that the Treasury has to accept responsibility—although, as it is a tax Bill, I suppose that that was inevitable. The Bill will affect the supply of development land and that is the responsibility of the Department of the Environment. The Treasury is answerable for many things but no for carrying out programmes. Indeed, some Labour Members seem to think that its sole responsibility is for carving up programmes. The Bill can vitally affect a programme and the Department concerned with the supply of land for development should be taking a close


interest in it. I regret that it does not seem to be taking a very close interest.
The argument in this debate is not about whether betterment should be taxed. It is about how betterment should be taxed. It repays us to remember that at all times, because there is a tendency among Government supporters to speak as though my right hon. and hon. Friends and I did not wish to see any taxation of betterment. That is not the case.
We may have been slow in bringing forward a special form of taxation. I can scarcely take the blame for that, because I had only been a Member of this House four weeks when a form of taxation was introduced. We were slow, but we agree entirely that we need a form of taxation for betterment. We are conscious, however, that it must be a form of taxation which does not damage the development industry make the building of homes more difficult to achieve, and interfere with industry and commerce.
When I refer to "betterment", I am using a term which I think is correct in this context. It is defined by the Royal Institution of Chartered Surveyors as:
… the enhancement in the value of land (including buildings thereon) resulting from the actions or decisions of central or local government or by a statutory body, or from the expectation of such actions or decisions.
That is betterment, and it is that which we are striving to find the best way to tax.
We are not concerned even with all forms of betterment. It is clear from what has been said in this debate that we are concerned with only one category of betterment, and that is the grant of planning permission for initial development or a change of use.
That is the category that needs taxing, for two reasons. The first meets the point made by the hon. Member for Dudley, West (Dr. Phipps) about the scale of the gain which can result from the grant of planning permission for initial development. It can multiply the value of land many times—20 times is normal and 50 times is not exceptional. The scale of the windfall gain is unique to that category of betterment.
Secondly, if we tried to tax other forms of betterment which could be held to flow from the actions or decisions of central or local government, I suppose

that a classic example would be the construction of roads. But then we might find more people claiming that they needed a reward because their land had suffered worsenment than those who required to be taxed because of a betterment, and the changes in value would be very much less than one arising from the grant of planning permission. So we are concerned with the taxation of a specific form of betterment arising on the grant of planning permission.
The risk is that, by introducing the wrong form of taxation or perhaps the right form at the wrong rate, we shall end up with not enough land available for development. Land, in a way, is like a mineral resource. If no incentive is provided to produce it, it will be left where it is unused. The hon. Member for Dudley, West referred to certain measures for the taxation of oil. Hon. Members on all sides of the House will be aware of the risks that we run in damaging the North Sea oil prospects if the taxation rate is such as to provide no incentive to produce the oil.
There are plenty of examples of minerals left lying in the ground because the return on mining them is not high enough. Cornish tin is an example where perhaps a sudden change in the price can again make it profitable to mine that commodity. But unless we provide an incentive, the commodity—land—like a mineral will be unused.
There is general agreement about this. My hon. Friend the Member for Aylesbury (Mr. Raison) referred to the point made by the Government's own Advisory Group on Commercial Property Development. I was struck by an article in New Society. My hon. Friend is always glad to hear that journal quoted. However, I found to my surprise that that article was almost in praise of the Community Land Act. But it said quite firmly that the tax proposals would encourage withholding and make non-compulsory acquisition for "positive planning" more difficult. Even the enthusiasts for the Community Land Act are concerned about the level of tax which the Government are proposing, and their concern is almost universally shared in the development industry, in the institutions, in the professions and by all those who have a real knowledge and understanding of and


day-to-day concern with the land market.
The Government supporters may say that the Community Land Act is the answer. They might have been able to adopt that approach had it not been for the secret being given away by the public expenditure White Paper, which we are told by the hon. Member for Bolsover (Mr. Skinner) is now in limbo. The White Paper figures show clearly that in the next few years the Community Land Act will make a minimal contribution to the supply of land for development. The shortage of staff in local authorities, to say nothing of the shortage of money, will make sure of that.
The real risk is that, because there are not many staff and because there is not much money, local authorities will be driven to concentrate on the very land that they should avoid—the easy land, the land where there is the biggest difference between current use value and development value, the white land, the agricultural land. They will not look for more difficult sites which need redevelopment, like the derelict sites to which the hon. Member for Dudley, West referred.
Because of the shortage of staff and money and because of the need to make quick profits to justify this ghastly Community Land Act, local authorities will be driven to concentrate on seeking agricultural land for initial development, which is just the sort of land that we do not want to use if there is a better answer. I, for one, believe that that answer is to be found in redevelopment, especially in our cities.
It is no answer to say that the Community Land Act will provide the land which is necessary for the development programme. On both sides of the House we have to recognise the need for sufficient financial incentives in a mixed economy. If there should be any Government supporters who do not recognise the need for sufficient financial incentives in a mixed economy, I point out to them that the source of that phrase in none other than the Secretary of State for the Environment in the course of a well-reported speech which he made in Costa Rica.
We have a method of taxation of betterment already. If we are to change it, it is the Government's responsibility

to say clearly why it needs to be changed. I can advance one good reason why we should change it. It is that the rate of taxation on individuals is much too high. That is a situation which I am sure my right hon. and hon. Friends would have changed if they had been responsible for introducing the development gains charge.
But I agree with the Paymaster-General, who, sadly, is no longer with us, about what he said in criticism of the DLT when he introduced the Ways and Means Resolution. He made three criticisms. He said that it had a variable rate, which was wrong, and I agree. He said that it did not cover gains in certain cases, like trading profits, and I accept that. He said that it did not help the local authority to acquire land net of tax, and I agree with that as well.
I do not want the Government to indulge in premature self-congratulation, because I assure them that there are many detailed criticisms of the Bill which will need to be made in Committee. There are also a number of substantial criticisms which have been made already. I single out the need for central assessment and the delay which is likely to result from it.
Then there is the timing of the liability to pay. One year after the commencement of development is far too soon. In most housing developments, it will impose an extra charge on the housing developer, it will affect his cash flow, and it will affect the end price to the consumer—the home buyer, especially the first-time buyer.
The exemption limits and the classes of exemption are unsatisfactory. Why will industry but not commerce be exempt? We are back to the absurdities of the selective employment tax by which if a warehouse is built attached to a factory it is exempt, whereas if it is built specifically for a distributor it is not.
The real central issue is the rate of tax and the bearing that it will have on the supply of land. From my position in the House I think that I may address both Front Benches on this question. My hon. Friend the Member for Aylesbury said that he was anxious to find an agreed solution. I hope that we all share his anxiety. Surely we can give priority on this matter to the supply of land for housing as something which will assist


rather than hinder industry and commerce.
We all recognise the inevitably long time scale of the development process. If we did not know it already, we should soon discover the damaging effect on the development process of frequent changes. The Paymaster-General said that any tax would have some effect on the willingness to sell. If there could be an agreement between the parties on the rate of tax, putting all the other issues aside, the disincentive effects on landowners to bring land forward for development would be very much minimised. We shall have made important progress if we can agree on that.
We have here an opportunity to find a reasonable compromise. The Government have suggested initially a rate of 66⅔ per cent., and the Opposition have suggested 52 per cent.—a very reasonable rate. It would seem to me that 60 per cent. would fit nicely between those rates. I suggest that figure, knowing that my hon. Friend the Member for Melton (Mr. Latham) would support it as one upon which we could agree.
We could then work on getting the details right and we should not have damaged the development process. We might have made a substantial contribution towards helping it. We might even have done something to justify the length, the complexity and the lack of clarity, to which my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith) referred, of the Bill.
Given time for detailed consideration—and the Bill needs detailed consideration—given a reasonable attitude from the Government, given close attention to the views of the professional bodies which we have received and which we shall continue to receive, and given a lower rate of tax on which we could agree, we can make progress in dealing with the problem of land which has been with us for far too long.

6.23 p.m.

Mr. John Tomlinson: I hope that my right hon. Friend the Paymaster-General does not follow too closely the blandishments of the hon. Member for Hove (Mr. Sainsbury) for an absolute consensus on levels of taxation either in this Bill or anywhere else.
I warmly support the Bill. In my avid reading of the enthralling contents of the Bill's 165 pages I came across parts which completely escaped my understanding. I believe that there is a consensus on the Labour Benches about the complexity of the Bill, and therefore my hon. Friends and I will be grateful if my hon. Friend the Minister of State, in replying to the debate, will try to deal with some of the incomprehensibilities which I shall draw to his attention. I give as an example the mumbo-jumbo of paragraph 6(b) of Schedule 6. If he finds it too much to deal with tonight, I should appreciate an explanation on some other occasion.
In dealing with the Bill my hon. Friend must bear in mind that many Labour Members feel that if anything the Government have gone too far in the consultative process in appeasing and compromising with the various interests. Labour Members were far more enthusiastic about the White Paper, judging from their turn-out this evening, than they are about the Bill. The White Paper proposed an 80 per cent. tax. Ministers have managed to reduce it to 66⅔ per cent. The consultative process has led to a whole range of changes, not all of which are greeted enthusiastically by my hon. Friends.
As well as a change in the rate of tax there has been a change in the rate of exemption. Those of us who supported the White Paper proposals will want cogent explanations for the reduction in the proposed level of tax and the increased exemptions. The White Paper contained a provision giving a husband and wife a single exemption between them. This restriction has been lifted after consultations so that the husband and wife may now have £10,000 exemption each. Many of us find it difficult to understand why that concession should have been made.
We can find one example after another of concessions, and yet concessions have not been made to all the interests that put their points of view to the Government. Perhaps I may refer to the interest expressed by the parliamentary committee of the Co-operative Union. I am not a sponsored member of the Co-operative Party. I suppose that my interest is limited to a £10 shareholding built up with blue stamps in the St. Albans Co-operative Society. The reaction to the


point of view expressed by the parliamentary committee needs a more adequate explanation than has been given so far.
Under Clause 19 an industrialist who develops land for his own use will not be liable for development land tax on the development until he ceases to use it for industrial purposes or disposes of it. That provision does not apply to development for non-industrial use. This point, which was referred to by the hon. Member for Hove, has a particular significance for the retail co-operative movement. Unless something is done, the movement will become liable for development land tax on such a development and will be at a disadvantage compared with the industrial user.
There is a further serious point affecting the co-operative movement concerning the unsatisfactory situation of transfers of engagements and amalgamations of retail co-operatives and societies. This rationalisation of the co-operative movement is being encouraged. Many of us are awaiting further encouragement from the Government, together with the promised co-operative development agency which was missing from the last Gracious Speech. We look forward with eager anticipation to its inclusion in the next Gracious Speech.
Clause 20, the relevant clause, does not cover the merger of societies, and it is considered by the parliamentary committee of the Co-operative Union that mergers of industrial and provident societies should not be treated as disposals for development land tax purposes since there will be no realisation of assets. Perhaps provision could be made, therefore, to exclude mergers in the same way as transfers of assets within a group are excluded.
There is a further point concerning the co-operative movement which will have a general application elsewhere, and that is the problems which arise with delays in granting planning permission. A case has been brought to the attention of the parliamentary committee in which a retail co operative society applied for planning permission in June 1974. No decision has yet been made on that application. Because of that delay, the development, planning permission for which was sought before the appointed day but

which permission, if it is granted, will come after the appointed day, will become liable to development land tax. These are three serious criticisms from the co operative movement which do not seem to have received the same diligent attention and response from the Government as some of the other points which have led to changes in the proposed tax as proposed in the White Paper.
The Opposition's amendment alleges that the Bill will impose
a levy at a rate which will serve only to inhibit the supply of land".
That claim has been made time and again by hon. Gentlemen opposite.
Over the past few years, it has become self-evident that there has been speculative activity in land to an unacceptable degree. For example, the index price per hectare taking that in 1970 as 100 has risen in successive years to 293 in 1974. That is an astronomic increase, which reflects not the value of the land, but the speculative value attached to it. The price dropped substantially in 1975. However, we should be aware that the value of land today is still more than double what it was five years ago, despite the fall.

Mr. Michael Latham: I think that the hon. Gentleman is quoting the Department of the Environment Press notice. Will he give the number of plots involved in those statistics which show how in 1975 the fall in values coincided with a division by four of the number of plots coming on to the market?

Mr. Tomlinson: No. I shall leave the hon. Gentleman to make his own speech. If I do not have the good fortune to hear it, which I expect I shall not, I shall read it with the same avid interest as I read the Bill.
The numbers of land transactions have been at a low level since 1973. However, that shows that they had been at that low level long before the concept of a development land tax, before any consultative document, White Paper, or anything else. It happened of its own volition within the free market in land at that time. The reasons go back to the boom in the early 1970s when many builders financially over-stretched themselves and were compelled to reduce their commitments by suspending acquisitions of land when the housing market became depressed.
Confidence is now returning. There is clear evidence of an increase in confidence. Whereas transactions have recently been about 30 per cent. compared with the peak of the boom, they have now reached 40 per cent. Admittedly, the level is still well below the peak of the boom, but the trend is rising fast and is clearly indicative of a return of confidence in the land market. The Opposition will no doubt allege that the increase in transactions—the sign of confidence returning—will dry up with the passage of the Bill. That forecast is strongly disputed and there is no evidence of it.
We welcome the development land tax and look forward to the Bill's speedy passage through Committee and all remaining stages and becoming an effective measure for planning. I am sure that the Bill will have the united support of hon. Members on this side of the House and, I suspect, in other parts if hon. Members vote according to what is desirable rather than what is doctrinally demanded of them.
I look forward to the Bill's going through Committee speedily and reaching the statute book. In the meantime, I hope that the Minister of State will consider my observations of particular interest to the co-operative movement, which over many years has demonstrated its good will towards and faith in Labour Governments.

6.34 p.m.

Mr. Stephen Ross: It appears that the criticism from the Government Benches is that the Government have been too lenient and from the official Opposition that they have been too harsh in the tax rate. Therefore, it is time that someone came to their defence. I support the hon. Member for Hove (Mr. Sainsbury), who said that it was desperately important that all parties in this House should decide what the tax rate should be and stick to it.
There has been a great deal of comment about land availability. It has been said that the tax rates applying now and the tax rates introduced by the Bill will keep land off the market. I have not been in practice for over two years, but my impression is that there are vast tracts of building land which unfortunate

developers and others bought at high levels and would be only too pleased to get rid of if they could find someone to buy them.
I am prepared to take a commission from anyone prepared to buy some of the many acres of such land in my constituency. There are vast areas which most of my constituents wish had never been given planning consent. The greatest problem facing local authorities is that they often have requssts from communities to stop any development on the land and to pay high compensation to those who acquired it.
I do not think that there will be any drying-up of the supply of building land for a number of years. It may be that in four or five years we shall have to reconsider the position, but my guess is that there is plenty of land scheduled for development for a long time to come.
It is necessary to state the Liberal Party's attitude to the Bill and to the question of the taxing of betterment generally. We have always thought that a better approach would be to levy a variable tax based on the annual value of land scheduled for development, which could be imposed by local authorities within 12 months of planning consent being granted and collected by them. The rate could be raised each year that the land was not developed. That would have the advantage of bringing land on to the market.
Local authorities which have prepared town maps and wish certain land to be developed face the difficulty of owners who do not wish to sell and decide to to hold on to the land. That is the right of the individual, which we would all protect. If the owner of land is taxed on it at a fairly low rate to start with, but at a higher rate as time passes, there will be an incentive to sell and the land will probably come on to the market. The Conservative Government in their Local Government Act 1972 did much the same when they introduced the rating of empty dwelling-houses and commercial properties. It is, however, important to be realistic. The Community Land Act is now in force and the Layfield Committee's Report is due at any time. I am fairly certain that that report is unlikely to favour any form of site value rating. Therefore our ideas, although very worthwhile, will probably no longer be valid.
Regarding the Community Land Act, I feel very much in accord with Mr. A. D. G. Smart, the former county planning office of Hampshire, who, in an excellent paper delivered at Oxford last September, said:
Despite occasional relapses into extreme pessimism I believe that it "—
the Community Land Act—
offers great opportunities if used with common sense according to a clear ordering of priorities.'
I hope that the Liberal Party will not support those who call for the complete repeal of the Community Land Act. Amendment, yes; but abolition, no. Frankly, we have been down that path too often before from the 1947 Act to the 1967 Act and now the Community Land Act. I served on the Committee stage of the Community Land Bill and clearly said how I felt it might work. I suggested that it could operate better in a regional context. I regretted it when the old Land Commission was wound up.
Development land tax is inevitably interwoven with the Community Land Act and makes a great deal more sense in this context than a development gains tax. Moreover, I believe that it is better thought out, and I am assured, in spite of all the remarks which have been made, that it is well drafted, although there are parts which I find complicated.
I am not a tax expert, but the British Tax Review in its fifth number of 1975 said:
If there has to be a new tax on the realisation of development value, the Government is at least presenting it in the best way.
It concluded with the following words:
Leaving aside the question of an 80 per cent. rate, the development land tax seems to be better thought out than the development gains tax. Lessons have also been learnt from betterment levy, because the over-elaboration of the Land Commission Act 1967 is avoided, leaving more to the general principles of valuation.
I do not think we can complain that we have not had plenty of warning of this measure. We have had some very helpful explanatory notes. I personally should like all land to change hands at existing use value—I make no bones about that—particularly when we are still suffering from the after-effects of the last land boom. However, I accept with reluctance but realism that there has to be some incentive to enable land to be

brought on to the market. Therefore, I congratulate the Government on taking; heed of the many representations which they have received on the rate of tax and the minimum exemption figure.
I am a chartered surveyor, and the RICS, in the publication quoted by the Paymaster-General, stated that in its view at least one-third of the gain should remain with the land owner. That is what the Government have done. I know that they have conceded only up to the £150,000 mark, but the Government have heeded that expression of concern by the RICS and have gone a fair part of the way to meet that concern. Personally, I do not see why gains over £150,000 should not be charged at 80 per cent.
In a later paper the RICS asked that the exemption figure should be raised to £10,000 and that marginal relief ought to be given on gains of between £10,000 and £20,000. The second request has not been met, but the first has, and it is fair to say that the Government have heeded those representations. I think, however, that the limitation of the tax concession to three years is too short, and that the figure of 66⅔ per cent. should be applicable for a much longer period, because it is obvious that local authorities—this is evident from the Public Expenditure White Paper—will not have the resources to acquire much land in the foreseeable future. A lack of incentive will persuade owners to keep their land off the market so that for a long time I expect there will be a shortage of new land coming on to the market. That is why I say that the three-year period is too short. In my opinion, it should continue for eight, nine or 10 years if we are to get to the second appointed day.
There is also a provision whereby developers who become liable to development land tax may spread their payment over eight years after an act of material development. They do not have to meet interest on the payments until they become due, and they have 12 months before the first payment is made. I still feel that that tax should not be charged until the completion of the project, although I accept that this may be more difficult to define. Many builders have difficult cash flow problems and have to borrow money at high rates of interest, but I think that we have a far better position than at one time seemed possible.


Therefore, the Government are to be congratulated on taking measures to meet the problem.
I support the hon. Member for Hove. Warehouse development has been specifically excluded, and I think that that is a matter of concern. If a warehouse is connected with industrial development it is included, but if it is pure warehouse development it is excluded.
There is a lack of provision for setting off losses against tax. Many firms badly need this help. I appreciate why this is not given, the reason being linked to the local authorities' ability to buy net of development land tax, but even this concession, as the hon. Member for Aylesbury (Mr. Raison) pointed out, does not seem to be to the liking of the Association of County Councils, which advances some plausible arguments as to why it should not be involved in collecting this money. That will have to be hammered out in Committee.
I also understand that the Association of District Councils did not like this procedure. It seems rather odd, but apparently it is difficult for those bodies, and some new thinking will be necessary on this subject.
The point was made by the hon. Member for Meriden (Mr. Tomlinson) that the date of the planning application should be substituted where exemption from development land tax on White Paper day is to apply. The Government have conceded that where an appeal proves successful, after a planning application has been made, it will be back-dated. This appears in Schedule 5. But this excludes the developer who has co-operated with the planners and agrees to re-submit his application at a later date. Professional men have advised clients not to push too hard.
Local authorities want to see land developed, but they also want to see something else happen first—a road improvement, for example—and they may say "If you come back in a year's time, we think we can give you consent." On professional advice, developers have gone away and have agreed to that suggestion, and now these people are going to be penalised. If they had really pushed their luck, they would not be in that

position. As usual, he who hesitates is lost, but it is the wrong way round and very unfair. It has penalised many people who would like to be helpful, and they ought to be encouraged if we are to have better planning in this country.
In Schedule 4, paragraph 7, the use classes appear to conflict with those which normally apply to planning matters. Under Class B there is no reference to showrooms. I should like to know why this is. Does a dwelling-house in Class A include flats? I assume that it does.
In Schedule 6 is there any need to limit offsets to six years? I am not sure when tax is due on the disposal of a lease where it has been capitalised by taking a year's purchase of rent. Is there the same provision for spreading the liability as under Clause 26? It would be better if in Section 5 the current use value were limited to the time of acquisition or on 6th April 1965, and if the additional words "whichever is the later" were deleted.
I welcome the £10,000 exemption announced today to both husband and wife. That is something on which we should congratulate the Government. I should like to know whether this concession applies also to business partnerships. I agree that the tax on a phase of the development is important where a developer undertakes a large scheme and then finds that he can manage only a part of it. He should rightly be taxed on only that part.
On the question of Churches, charities and pension funds, surely Churches and charities should be completely exempt, not just prior to White Paper day but at least until there is a vast improvement in our economic situation. They are being hammered. One knows that, following a recent House of Lords decision, where charitable organisations run retail shops they will not have to pay the full rates. I know of one charity which is in debt, having had to find enormous rates to satisfy the local authority, and it will have to give up. I am sure that, on top of the taxation provisions in the Bill, it will make the position of charities virtually impossible.
I have never favoured—I have said this in earlier debates—that Churches and charities should make their money


out of speculative gains. I have always regarded that as unacceptable, but I see the argument that this is the only way in which they have been able to finance themselves up to now and, obviously, that is what they have had to do. Something will have to be put in its place. One could envisage some sort of global fund being established to meet this need, something on the same lines as was done about tithes. In 1936 the Government provided money to wipe out tithes. The Churches and charities must be helped somehow, because if they go to the wall I do not see how we could take over the great work which they do at present, the need for which, of course, is likely to grow at a time of severe restraint.
The pension funds also have problems to face. They are responsible for the long-term investment of vast sums of money, a great deal of which is already invested in property in this country, and they will be more adversely affected by these taxation measures. I urge the Government to think again about that.
Now, I must say a word or two about the attitude of the official Opposition. I find it amazing to hear the Conservatives talk in terms of a tax rate of 52 per cent. Their memories must be mighty short. The general public have been extremely unhappy about land speculation, and people want to see it properly taxed. I am addressing myself seriously here to the Conservative Opposition, trying to forget all about party politics. I hope that they will have second thoughts.
Nobody wants to see a return to the balmy days of the early 1960s or of 1971–73. Such a state of affairs could do no good. It would only bring in yet another batch of get-rich-quick speculators, many of whose predecessors are now relaxing in the South of France and discussing daily how the United Kingdom has gone to the dogs. They are the ones who got out when the going was good, and that is where they are now. We do not want that to happen again.
It is important—I support the hon. Member for Hove here—to achieve consistency in these matters. I happen to believe that the Government have got it about right. Whether their own Back Benchers think so, or whether the Conservatives think so, I consider that they are nearer right than wrong in present circumstances, and with the additional

concessions announced today they deserve our support tonight.

6.52 p.m.

Mr. Michael Latham: I start, as I always do in these debates, by declaring an interest in that I am a director of Lovell Homes Limited, a company which is building several hundred private houses a year.
It is always a pleasure to speak after the hon. Member for the Isle of Wight (Mr. Ross), who knows a good deal about this subject. What is more, he has read the Bill, which cannot be said for all hon. Members who have addressed the House today. One understands the reason for their not having studied the Bill, and they have none the less made some useful contributions.
I must point out at the outset that the hon. Member for the Isle of Wight let the cat out of the bag fairly early in his speech, and perhaps this explains what I understand will be the attitude of the Liberal Party in the vote tonight. The hon. Gentleman said "I, personally, should like to see all land change hands at existing use value". That is a radical proposal, well beyond any proposal for 80 per cent., 66 per cent. or 52 per cent.

Mr. Stephen Ross: What about Lloyd George?

Mr. Latham: I shall have a word to say about Lloyd George in a minute or two. First, however, I have a somewhat disagreeable duty to perform, and it arises out of the timing of the Government's announcement of the date 1st August, which, I understand, the Paymaster-General first made in the debate on the Ways and Means Resolution on 25th February. I say this in no carping spirit, but I read in the Building Trades Journal of 20th February—that is, several days before the Paymaster-General spoke—the report of a speech by the Government's industrial adviser on construction, Mr. Roger Warren Evans, in which it was said:
Land sales will not be liable to the controversial development land tax until at least four months after the Act comes into force.
Those four months, of course, are the difference between 6th April and 1st August, and in my view announcements of that importance should not be made in that way. I leave that thought with the Minister.
I now pass from that slightly disagreeable matter and turn to the Bill itself. This is a bad Bill. It is a measure designed to ensure that in three or four years there will be little or no land in the hands of house-builders. As I have explained in the House on several occasions, including the debate on the Ways and Means Resolution, the reality on the ground today is that builders have, on average, two years' stock at most and are only buying land with planning permission—frequently, as the hon. Member for the Isle of Wight suggested, from receivers and other builders who are closing down their business. It is land which they can develop immediately. No builder in his right senses is buying any land without planning permission, especially if it has substantial hope value, and very few vendors are bringing such land forward.
The reasons are simple. The existing development gains tax and the proposed development land tax are too high, and the threat of compulsory acquisition under the Community Land Act is too great. Builders have not forgotten that the real intention of the Community Land Act was stated by the Secretary of State for the Environment in a speech which he made to UCATT, the construction workers' union, on 21st June 1974, when he was already in office. The right hon. Gentleman said:
Our aim is that all land needed for development and redevelopment shall pass into public ownership as rapidly as possible.
That is the intention of the Community Land Act, and that is why builders realise where the real voice of Socialism speaks and why they are so disturbed about the present situation.
In three or four years, unless the Bill is radically changed, there will be a land famine and rising prices which will make 1971 and 1972 seem quite tame in retrospect. I suggest that the hon. Member for the Isle of Wight should bear that in mind before his party casts its vote tonight.
Going back to first principles on the Bill, I shall suggest one or two ways in which we could defuse this great issue once and for all. Attempts have been made by successive Governments over the centuries to reconcile the rights of private individuals to take such action as they think fit to alter or improve their property

with the rights of other individuals to have their environment protected. The first attempts known to me to solve that dilemma in England at least—there were several others in ancient Rome—were made by Henry IV in about 1400 with reference to certain buildings in London. They were a failure, as all other attempts have been since.
However, I suppose that it was only with David Riccardo's theory of rent that the problem of betterment first began to be seen in philosophical terms as opposed to matters of sanitation or public safety, because from Riccardo's basic principle that the price of land was determined by the price which a commodity upon that land, be it grain or be it speculatively built houses, would fetch in the open market at any time, Radical philosophers began to construct the idea that the creation of wealth through development was a useless activity, merely allowing the developer to obtain a reward bestowed upon him by a benevolent State which permitted him to develop it.
That concept was quite different from Riccardo's principle, and it led directly to Lloyd George's wholly abortive land tax, and the violence of his language against landowners in 1909 and 1910—"They toil not, neither do they spin"—for which Mr. Asquith had to tick him off.
The assumption of isus,sq c wi?t,xf phers, which is also the assumption behind the present Bill, which follows a dreary succession of measures dating back to the People's Budget of 1909—all of them disastrous for the housing programme—is that the citizen is not the master of his own property. To the Radicals at the beginning of this century, the issue was simple, expressed in the words of their famous "Land Song" bawled out at countless public meetings:
God gave the land to the people".
That notion, which is somewhat difficult to discuss logically, fails to answer the question whether God also intended the land to remain in its original unimproved state and, if not, how people were to decide who was to improve it, and in what way.
As we all know, the problems of town and country planning are not problems on which the Bible speaks very clearly. Therefore, Radical philosophers had to make up the rules themselves and then


attribute them to God—unless they were addressing a meeting of the National Secular Society, when such an approach would have been inappropriate.
In 1947 the Town and Country Planning Act first spelt out in law that God gave the land to the people, or, rather, he gave it subject to the transitional provisions of the £300 million compensation fund, which, incidentally, is still rearing its ugly head in the Bill. The criteria by which people were to decide whether a man could improve his own land were to be laid down in the development plan. God proposes, but the planner disposes. Unfortunately, the plan turned out to be a disastrous prop to the whole system since it was always years out of date by the time it was approved.
Thus, ever since the attempt in 1947 to take all the land and the betterment for the people, we have had the Conservatives taking part of it in short-term gains tax in 1962, with Labour following that in 1967 with 40 per cent. under the Land Commission Act, then back to capital gains tax in 1970, then 83 per cent. in the development gains tax in 1974, and now 80 per cent. for all—not just for land vendors—in 1976.
This cannot go on. We must settle the issue once and for all in the interests of the housing programme. It is no good expecting builders to meet the nation's needs if the rules of the game are changed every three years or so. Both sides of the House need to compromise. We on this side should accept that it is necessary to meet the Labour Party by taxing betterment at a higher level than other forms of gain, if only because there is such strong feeling on the issue. Equally, the Labour Party should accept that we on this side can never agree to the State's having massive powers of public acquisition or being the monopoly or main supplier of building land to builders.

Mr. John Lee: Many of us would regard as unexceptionable the proposition that the matter should be settled once and for all. In pursuit of that, may we have an undertaking that if the Bill becomes law, though much of it may remain distasteful to the hon. Gentleman, a future Conservative Government will not monkey about with it as they did in 1959 with the previous Labour Government's land planning legislation?

Mr. Latham: I cannot give that undertaking, because I sit on the Back Benches. But even if I were on the Front Bench I should not want to give it, for the reasons which my hon. Friend the Member for Aylesbury (Mr. Raison) made clear. I do not think that the hon. Gentleman heard my hon. Friend's speech, but perhaps he will read it in Hansard tomorrow, if we are allowed to read that publication tomorrow.
I believe that we can make progress on this matter. If the two sides meet, as I have just suggested, and deal with the problem with the maximum of practical common sense and the minimum of emotion, the following package becomes possible. First, the rate of taxation on planning gains by land vendors should be 60 per cent., of which half should be paid to the local authority. For builders, whose land is their stock-in-trade, the tax should be at corporation tax rates. Secondly, land developers should be required for sites above three acres in size to make financial contributions, which would be offset against their tax liability, on a predetermined scale to local authorities to pay for vital infrastructure.
The Paymaster-General asked how that should be done. I know that incoming Governments do not see the papers of their predecessors, so he could not have seen the consultation papers issued by the previous Conservative Government. However, I saw them and dealt with them when I was Director of the House-Builders' Federation. I know that detailed schemes were made available by the Department of the Environment then. I did not agree with all the details, but schemes were drawn up.
Sites smaller than three acres should be exempt, except in urban areas where costs are high, and agreements under Section 52 of the Town and Country Planning Act should be made to run with the land. Local authorities' powers of compulsory purchase should be in general the same as they were before the Community Land Act was passed. But—perhaps this is a major step forward in my thinking, though I know that I shall not carry all my hon. Friends with me—where a major expansion area is envisaged involving sites of 100 acres or more, in accordance with a properly approved structure plan, local authorities should


be given those powers of compulsory purchase that are available to new towns, including acquisition at current use value. However, land acquired in such major expansion schemes for home ownership purposes should be disposed of by auction or tender freehold at market prices to private builders, with proper phasing conditions for the time of development.
The Bill meets none of those objectives. It is a tragedy that it continues on the old discredited partisan lines. Its Second Reading will be a black day for the housing programme. That is why we should not pass it in its present form.

7.5 p.m.

Mr. Joseph Dean: I am glad that the hon. Member for Melton (Mr. Latham) sits where he does because of some of the comments he has made about land and its uses. A number of previous speakers have referred to the Community Land Act and have said that it received overwhelming and enthusiastic support from this side of the House. But I did not receive it in such a manner. I criticised it because it did not go far or fast enough. I did not think that it gave local authorities in areas where land was scarce the means to act rapidly because of the financial stringency that was imposed upon them if they decided to act.
The moratorium in the Act on land with planning permission makes nonsense of the Act to most of the cities with large populations and density problems and which have no land on which they can take options. I did not view that Act with the same enthusiasm as did some of my colleagues, and I fail to understand the enmity of the Opposition to it.
I was surprised by the assumption in some speeches today that there are thousands of acres of land available. The picture is different in each community. The hon. Member for the Isle of Wight (Mr. Ross) spoke of hundreds of acres of land being available. I do not believe that there are hundreds of acres available for housing in Greater London, for instance. Other major cities with housing problems do not have large areas of land available. Most large authorities, particularly London, have been held to ransom over the purchase of land in their attempts to solve housing problems.
The approach to the Bill highlights the different philosophies of the Labour Party and the Conservative Party. I fervently believe that land belongs to the people. It should not belong to an individual who might have acquired it by heritage, or by not the most moral financial practices over the last 10 or 12 years. Most of such people are concerned to see the land developed not in the interests of the community but in the interests of their own bank book. Land within the community should be developed by the community for the community.
Some hon. Members have said that agricultural land may cease to become available because of the rate of tax. I represent an area, and have lived in an area, which has not the option to buy such agricultural land. Therefore, that part of the argument does not mean much to me.
I shall recount an experience that I had when I was charged, with some of my local government colleagues, with trying to solve the disastrous housing problem in a major city. It had hardly any suitable land within its boundaries and it had to develop on land other than that on which the slums stood. On any reasonable standard it was necessary to decant 50 per cent. of those occupying the slums to areas outside the city borders. It was necessary to look for land in what was described as the farming belt.
The city procured a large area of land and a deal was negotiated at agricultural land prices. In fact, the price was very reasonable. Lo and behold, once the plans were approved the Department of the Environment and the local district valuer said that the land was no longer agricultural but residential. The land doubled in value. It is true that those who were to live in the houses built on the land were to pay rates to the outside authority, but in the broader sense it was necessary to take into account those populating the council houses in the stress areas who were called upon to subsidise land that had been bought outside the city at an inflated value.
The hon. Member for Daventry (Mr. Jones) spoke of high-cost land fetching £28,000 an acre. At least a decade ago, some of the major cities outside London—that is a unique area where at one time £100,000 an acre was considered cheap—were buying at much higher prices. The


city I used to represent bought land at £65,000 an acre a decade ago and was then faced with the task of knocking down rubbish.
In those days the Conservative Government gave a reasonable subsidy for expensive sites, but that could not cushion a community against the cost of redeveloping. In some cities a huge site becomes available perhaps because a nationalised industry or a Government-owned industry decides to rationalise. The local authority may be beaten on the open market because a speculator is in the position of being able to play with money. We all know that local authorities have certain control over development and planning but that their powers are strictly limited and of minimal effect. We know what happens when the speculators move in. In some cases the more progressive local authorities have objected to speculative development. I think that the successes of the appeals are evident that it is a worthwhile objective.
When that sort of development takes place, the community is left to pick up the bill. The rateable value increases, but that does not pay for the infrastructure that has to be introduced to support the development. There is a tremendous shortage of land, not a surfeit. Despite what many Opposition Members say, the majority of rehousing results from bad housing conditions. Those who are rehoused do not want to move very far.
I do not consider the new towns to be an outstanding example of rehousing. I do not believe that they always provide wholesome communities with all the facilities that communities require. They have been a most expensive and ineffective form of rehousing. The new town authorities receive greater grant per house than inner-city areas. They receive a far more generous grant from this Government, and they did so from the Conservative Government.

Mr. Robin Corbett: Does my hon. Friend accept that there is a social value in new town development—namely, in encouraging those from the stress areas of major conurbations into more pleasant surroundings and into jobs which, by and large, are nearer at hand, thus reducing commuting?

Mr. Dean: I take note of my hon. Friend's point. However, I believe that,

in general, new town developments have not been an outstanding success. I believe that the debits are in the majority. I know that my hon. Friend represents an area in which the experiment has been carried out successfully.
Some of the major cities, such as Liverpool and Manchester, have had to decant people on to land that was not designated for development. After purchasing it, and after the plans have been drawn up, the land has been categorised as residential and the authorities have had to pay the extra. They have not been able to develop under the favourable circumstances of new town status.
Some of the Liverpool and Manchester overspills have the dimension of new towns, but they have not received comparable grants from the Government. I am not saying it is wrong that new towns receive generous Government grants, but I believe that the stress areas should be treated equally favourably.
It has been said that the Bill will reduce the amount of land available for building in the private sector for owner-occupation. I am not one who is commited to the 100 per cent. municipalisation of property or who wants everyone to live in a council house. In fact, I do not live in a council house. It is a sad fact of life, however, that a large proportion of the British people have no hope of ever obtaining a house unless they opt for a council house.
Despite what has been said by the hon. Member for Daventry, who inferred that the council house building programme attracts a subsidy that makes matters not quite as good for the owner-occupier—I think he said that the municipal building programme was a far better financial bet—most recent figures indicate that the owner-occupier receives far more than the repayments made under the new capital building programme.
One of the oddities of the present system is that the dearer one buys, the greater the subsidy. The system cannot work favourably for working-class people who want to buy cheap houses. Let us structure a new tax benefit system that will inject some incentive into the lower strata of wage earners so as to encourage them to buy their own houses. The maximum effort should be directed towards creating favourable conditions for those


buying houses within the cheaper range, not for those buying at £25,000.
I began by saying that I was not an enthusiastic supporter of the Community Land Act. I end on the same note. This Bill, when enacted, will at least claw back to the community in a general sense, in respect of both ratepayers and taxpayers, some of the money that is now being expended by them. I welcome the Bill and hope that it will receive a Second Reading.

7.21 p.m.

Mr. Douglas Crawford: Along with Conservative and Liberal Back Benchers, I had the privilege of hearing both Front Bench speakers at the opening of the debate. I do not think that that applies to any Labour Member who is now present in the Chamber. I did not agree with everything he said, but the hon. Member for Melton (Mr. Latham) made a decisive and useful contribution.

Mr. Budgen: Does not the hon. Gentleman recall that he was vigorously and unfairly attacked in Committee on the Community Land Bill for his temporary absence, and does he not now compare that attack to the way in which the Chamber is now denuded of Labour Members?

Mr. Crawford: I am grateful for the hon. Gentleman's support. It is a pity that the hon Member for Melton was not supported by any Scottish Conservative Members when he made his remarks.

Mr. Ioan Evans: Perhaps the hon. Gentleman will record the fact that there are many Government Members now present as against few Conservative Members, and will he also note that he is the sole representative of the SNP?

Mr. Deputy Speaker (Sir Myer Galpern): I hope the House is aware that we are now discussing the Development Land Tax Bill and not attendance in the House of Commons.

Mr. Crawford: The House will be aware that the SNP had reservations about the Community Land Act. Therefore, we reserved our position on Second Reading because we sought certain safeguards to take account of the different situation in Scotland. The House will

also be aware that in Committee scant regard was paid to those safeguards. Therefore, my party voted against the Bill on Third Reading. It is not uncommon for this House to disregard the different situation of the Scottish economy, its law and its land availability, and this Bill is no exception to the general rule.
I wish to list five main differences in the land systems of Scotland and England. Land in general in Scotland is not in short supply. It is self-evident that we are a less densely-populated country than is England, we are less urbanised and more land is available.
The second point is that in Scotland there is a much larger local authority land bank available per capita than there is in England. This means that in general there is far less demand from developers to apply pressure in terms of the supply of land. Indeed, the situation is quite the reverse. The Bill could, if enacted, act as a positive disincentive to making more land available. I presume that that is the reason behind the Conservative amendment.
The third difference between Scotland and England is that in Scotland there has been a realisation among Members of Parliament, local councillors and others concerned with Scotland's industrial renaissance that, there is a vital place for the private developer. Of course, there is also scope for corruption, public as well as private. My hon. Friend the Member for Dundee, East (Mr. Wilson) will know about the potential for public corruption. After all, it is the private developer in Scotland who has built most of the houses in the public sector and also our publicly-owned factories. It has always been more difficult to achieve such developments in Scotland than it has been in England. If we examine the situation in central Scotland and compare it with the expanding towns of, say, Andover and Basingstoke, the difference in the situation is obvious. I have a provisional suggestion to make to the Minister a little later in this context.
The fourth difference is that there is less fertile ground for speculators in Scotland than is the case in England, and particularly in the South-East. Speculators can flourish only in conditions of scarcity of a commodity—in this case land. That


situation occurred in the South-East of England between 1960 and 1974. Speculation commenced under Conservative rule and the secondary banking boom upped the supply of money in this respect. But only in a small way can a similar situation be said to have existed in Scotland. Therefore, development land tax as it stands is largely irrelevant, if not positively harmful, to Scotland.
The fifth difference relates to the Church of Scotland. Sales of property by the Church of England can be regarded as individual transactions for the purposes of the Bill. In Scotland the situation is different. In 1921 an Act of Parliament was passed creating the General Trustees of the Church of Scotland, comprising 30 people, half of them clergy and half of them lay. Four years later, in 1925, a further Act was passed which vested in the General Trustees 70 per cent. of all Church of Scotland property—churches, halls, vestries, manses, glebe land and so on. The other 30 per cent. of the Church of Scotland is vested locally in individual congregations.
In December 1974 the insured value of all Church of Scotland property was £118 million. I appreciate that this does not bear much relevance to current values. Will development land tax be calculated on a cumulative basis per annum as regards property sold by the General Trustees who have vested in them 70 per cent. of Church of Scotland property? This situation compares unfairly with the situation in the Church of England. I appreciate that the Minister cannot perhaps answer this question immediately, and I shall be prepared to receive a reply by letter.
Those, then, are the main differences in the situation between Scotland and England. Nobody would dispute that Scotland needs development in housing, shops, factories and industrial premises. Nobody doubts that Scotland can sustain, and needs, rapid economic growth.
However, there is a big question-mark hanging over the situation. The reason for that question-mark is that the Bill could keep development land off the market. It is true that, as I have said, a local authority land bank already exists in Scotland and, therefore, the situation would not be serious in the medium term. But given the rapid economic growth that Scot-

land deserves, the Bill could have serious effects on employment in the medium term. The second reason for the question mark is that where land is offered, the development land tax could be inflationary because the vendor would want to increase his selling price to offset his tax liability.
The third reason for the question-mark is the cash flow problem that faces small builders who have to meet their tax bill only a year after the first trench is dug. I appreciate the rationale behind this because it is an effort to stop private development and to enable the community to carry out its own development. But surely this is taking things too far.
One accepts the general aim of the Community Land Act, which seeks to ensure that most development land should be purchased at current use value by local authorities, and that any significant profit accruing from the change of use should accrue to the community rather than to a speculator. But—it is a large "but"— it surely is going too far to stop the development of land by private developers whose development profits have already been extracted on behalf of the community. It is not just that local authorities do not have the labour and money to carry out work. The situation is made worse when local authorities in Scotland have been told to cut back even further. Anybody who believes in a mixed economy will appreciate that these proposals go too far. They represent the unacceptable face of State Socialism.

Mr. Corbett: Is it the hon. Gentleman's view that the major part of the gain from development rests with the individual? Is he saying that the private tartan pocket should be filled ahead of the community's pocket?

Mr. Crawford: Assuredly not. I have just said that we accept the general principle of the Community Land Act, that profit on the difference between CUV and market value should be taxed heavily. I was addressing myself to the point that it is wrong to try to do the bona fide developer out of the chance to develop. The development land tax as it stands may well bring this about. I suggest to the Minister—

Mr. Ioan Evans: The hon. Member says that the Bill will stop the private


developer. Can he point out how it does this?

Mr. Crawford: I am not saying that it stops the private developer. I am saying that it will tend to stop him because of the intention to impose this tax one year after the first trench is dug. It will discourage him. I suggest that perhaps the original 1974 Barber proposals, implemented by the succeeding 1974 Labour Government, dealing with development gains tax could effectively act as a vehicle for the journey of the Community Land Act.
To tax the private individual at an original 83 per cent. of his development gains seems to be a fair way of ensuring that the State gains from changes in the use of land while, with DGT at a de facto corporation tax rate of 52 per cent. for bona fide building companies, cash flow would not be hit so hard. There would not be so many liquidations. If that is not acceptable, I suggest a more varied rate of DLT with perhaps an immediate 80 per cent. rate for individual gains above £150,000 dropping to 70 per cent. for gains above £120,000 and going progressively downwards. This would effectively hammer the out-and-out speculator while easing the inflationary pressures on bona fide developers of a smaller size.
A further variation or addition to the scheme could be to vary the rates downwards for intermediate and special development areas. This would have to be approached carefully. This careful approach could discourage the cowboys and direct development investment to those areas where it is most needed. Intermediate and special development areas already discriminate positively in favour of industry. Perhaps a little discrimination in favour of development of land would not be a bad thing.
The Bill does not recognise that the differences between Scotland and England should be treated separately. There should be a separate Scottish Bill and it should be debated in the Scottish Assembly, when it is established. I am especially concerned that the Bill has been introduced by Treasury Ministers, since the Treasury is perhaps the most centralised and London-oriented Ministry of them all and one which at the weekend

came out with some original views on a weak and a strong currency. In view of this, and because there is not sufficient recognition of Scotland's position in the Bill, I shall be concerned to hear what the Minister has to say in reply.

7.34 p.m.

Mr. George Rodgers: I was interested to hear the comments of the hon. Member for Perth and East Perthshire (Mr. Crawford). I am astounded to learn that he recommends that we should incorporate previous Conservative legislation in the Bill despite the fact that this has been put to the test and found wanting. I also found it rather surprising that he should take such a parochial attitude towards legislation of this nature. Surely we should have the community at large in mind when discussing such issues.
There can be no doubt that the Bill is a formidable document. The explanatory notes which accompany it comprise almost 100 pages. My heart goes out to my colleagues in local government who will be expected to assimilate the clauses and exemptions. I hope that considerable Government assistance will be made available to members and officials of local authorities and that they will have the full co-operation of the Government in interpreting and implementing this measure.
In certain areas the Bill is crystal clear. It is on those areas that I shall concentrate. In those circumstances it will be appreciated that my contributions will not be lengthy. I make it clear at the outset that I wholeheartedly approve of the Bill. I recall many instances in local government when the efforts and the finance of the local community enhanced the value of land. It was the local community which provided the roads, the sewerage systems and the servicing facilities for the green acres. As a consequence, the value of the land increased enormously. Yet the community, far from receiving the benefits, was forced to pay heavily from the community purse for that land.
It cannot be emphasised too frequently that development land tax will not apply to the ordinary owner-occupier. There has been much misunderstanding about this, with the result that many who have purchased their own homes have been caused worry and unnecessary distress.


At one time there was quite a campaign suggesting that owner-occupiers would be heavily penalised by the terms of this measure. I received a great deal of correspondence from local Conservative organisations and from other correspondents inspired by those sources. Those who wrote to me were gratified to find that they would not be affected by the terms of the Bill.
The tax will not be payable by an individual on the sale or development of his or her property including land up to one acre, inclusive of grounds or gardens and the site of the house. This is an important feature of the Bill which should be made widely known since it applies to the great majority of owner-occupiers. The exemptions apply only to one property, namely, the residence which is the main or only residence out of a period of 12 months during the previous three years. That is a fair arrangement. It is also of interest to note that the tax will not now be charged when an interest in land passes on by outright gift or death, although, naturally, there are clauses to prevent the abuse of this formula.
It is necessary that protective clauses should be included. There have been many instances of legislation that was intended to be reforming and which has been got round by lawyers in the most extraordinary way. Immediately after capital gains tax was introduced, there was a newsagent's placard in a London street advising people to buy a certain financial paper which would explain how to get round capital gains tax. I accept that there is a need for these clauses.
We should also note that approved co operative housing associations and self-build societies will not be liable to development land tax on the erection of buildings. Nor will it apply to the disposal of land by registered housing associations or the Housing Corporation. They will, of course, be liable to the tax on disposal of land when it is sold for other purposes. Similarly, there is exemption for industrial development. This applies also to welfare provisions attached to industry. The tax will be chargeable should the land be sold for purposes other than industrial development.
Statutory undertakers and other such bodies will be enabled to carry out de-

velopment for operational use without liability. The tax will not be payable on developments for agricultural purposes—again, a notable area of exemption. There are tax exemptions for qualified charities and Churches and it is clear that many of the charges originally levelled against the proposals when they were first mooted have been dispelled by the multitude of exemptions incorporated in the Bill. It is possible that some Labour Members think that the exemptions are too numerous and too generous.
Development land tax is a necessary part of the advance towards a comprehensive policy that will deal with the speculation in land and property—speculation which has created so much misery for some and so much unearned and unwarranted income for others. The Bill is in harmony with the Community Land Act 1975. It is an essential step towards achieving the aim of bringing the land needed for development into community ownership. It will do much to prevent the easy accumulation of private wealth by those who trade in land and property.
I recognise and applaud the purpose of this legislation and I hope that the justification for the complexity of the Bill is that it is designed to prevent abuses that we have frequently seen in the past. It is not always appreciated that the fortunes made by those who speculated in land were ultimately funded by those who had to meet the cost of the soaring price of homes, usually those with modest incomes.
Local authorities will benefit enormously—this is worth stressing, because there has been much comment by hon. Members on both sides of the House about the cost of rates to residents—by being able to buy development land net of tax. That effectively will lower the cost. Plainly it will be reflected in their land accounts and will contribute to an eventual surplus which will be shared out so that 30 per cent. will be retained by the local authorities, 30 per cent. will be devoted to authorities not showing a surplus and 40 per cent. will go to the central Government. It is plain that local authorities will benefit when they acquire land for their own purposes such as building a community hall or a hospital. This is a source of revenue to the rates which has not previously been available.
We should carefully examine these proposals before rejecting them. Ratepayers, who claim that they have been beleaguered for a long time, once they recognise the benefit which will flow to the community—and it is right that the community should benefit—will embrace them. It is right that the community should benefit rather than that land should make private people and private organisations prosperous. The enhanced value of a diminishing asset is the entitlement of the community at large.
I suspect that some of the concessions which have been made are far too generous. A much greater rate of tax should have been imposed at the higher level. None the less, I warmly welcome the Bill and trust that it will have a fair passage in Committee.

7.43 p.m.

Mr. Nick Budgen: I declare two interests: first, as a barrister, although I do not practise in this area of the law, and, secondly, as the owner of a small area of land which may, in the far distant future, attract planning permission.
I speak more in sorrow than in anger. I regret to say that my supply of anger has run out. During the passage of the Community Land Bill, I expended all the anger which I was able to produce, and, unhappily, I expanded it against hon. Members opposite. Only if I were attacking those on my own side would I find that I had any more anger available. If I were attacking my side, I might be able to speak of my brothers and colleagues as though I were a drunken oaf.
I speak in sorrow about a great industry which is in serious difficulties, in which there are nearly 250,000 men unemployed, in which recently as many as 1,000 young apprentices were laid off, and which has attracted a large part of the savings of working people. On the whole, pension funds are divided in three ways: one-third goes into fixed interest investments, one-third goes into equities and one-third goes into property. The third which goes into property has been attacked in the most brutal and vigorous way——

Mr. Brian Sedgemore: It should have gone into industry.

Mr. Budgen: Perhaps. But the people who hope to benefit from those pension

funds have lost a large part of their future security as a result of the Government's attack on the property industry, and the development land tax is an essential part of that attack.
I speak in sorrow also because most of the building in this country is done by small builders. Forty per cent. of the houses being built are being constructed by builders who build no more than 100 houses a year. An hon. Member opposite—I think that it was the hon. Member for Meriden (Mr. Tomlinson)—spoke about the need for a few of the more complicated schedules in the Bill to be explained to him by the Paymaster-General. The Paymaster-General has a fine academic record and he specialises in the complexities of tax law. Most builders have neither that speciality nor that fine academic record and they will not be able to work their way through the intricacies of this maze.
I speak also with profound sorrow because—and this is not a matter about which we can laugh and joke, as we often do in the House—the Government rode to power in February 1974 largely by attacking what they were pleased to call the great gains made by speculation in land. I see the hon. Member for Birmingham, Erdington (Mr. Silverman) nodding in agreement. The development land tax will take away some of those speculative gains. It will be a crucial factor for builders and developers in deciding whether to employ some of the 250,000 unemployed people. I should have thought that, after all the rhetoric, some hon. Members opposite who represent such unemployed people would have taken the trouble to read the Bill.

Mr. Corbett: Since the hon. Gentleman seems to be in an unusually generous mood, I wonder whether he would like to fulfil the whole extent of his generosity by acknowledging that, despite the problems of the building industry, far more houses are now under construction in the private and public sectors than was the case under the Conservative Government.

Mr. Budgen: The hon. Gentleman knows that that does not arise from what I was saying. I can well understand why he wishes to draw attention away from the serious comment which I have made


about the way in which the Labour Party is dealing with this matter.
Two hon. Members opposite had to be drafted in by the Government Whips to make what they admitted to be impromptu speeches without having read the Bill. The Bill concerns what they regard as one of the central problems in our society and one of the arguments which entitle them to rule the country. It is a disgrace that a great industry which is in terible disarray should be treated in such a cavalier fashion by the Labour Party.
The hon. Member for Dudley, West (Dr. Phipps) spoke from his knowledge as a farmer, and with what appeared to be moving sincerity, about his desire that the number of green field sites should be limited. It was plain that he had not considered the financial implications of the Bill. If he had listened to the hon. Member for Leeds, West (Mr. Dean), who spoke, from his knowledge of local government, about inner city sites costing as much as £65,000 an acre a decade ago, he would have learned that in redeveloping land on which tatty buildings have been erected the additional value conferred by planning permission is very little. He would have known also that in developing an inner ring area the probability is that one must acquire by compulsory purchase against a multiplicity of owners; and it is a much more complicated matter from the point of view of the legal procedures which are antecedent to compulsory acquisition.
If he had considered the matter at all, the hon. Member would have known that when one is dealing with a green field site, the land is usually in single ownership, and, most important in regard to this legislation, where a green field site is given planning permission for any form of development, it obtains a greatly increased value. Local authorities will be able to buy these sites net of development land tax and the financial inducement to them will be directed towards buying green field sites.
Hon. Members below the Gangway opposite—and I am pleased to see the hon. Member for Luton, West (Mr. Sedge-more) here—know that the thrust of the Government's economic policy is to reduce public expenditure and therefore their direction to local authorities will be

"Go for the green field sites where you can make a quick kill". The hon. Member for Dudley, West indulged in Labour Party rhetoric against the so-called speculative gains in property, but he had clearly not bothered to consider the facts.
I regard the hon. Member for Meriden as a serious commentator upon economic matters, but he is, unhappily, a fashionable commentator and, as is now the fashion in the Labour Party, he is a monetarist. However, he tries to advocate monetarism in Keynesian terms. I hope that he will stop talking about land prices being driven up by speculation. In general, speculators do not affect the price.
The reason prices rose so fast under the last Conservative Government—and here I rely for my instruction, as do many other hon. Members, upon the right hon. Member for Battersea, North (Mr. Jay)—was that the supply of money increased faster than the supply of land with relevant planning permission. That is why prices increased by 20 per cent. during the great boom of 1971–73. It had nothing to do with speculators.
Is it now being suggested that speculators have driven down the prices? Did Mr. Lyon drive down the price of property so that he might receive the enormous benefit of going bust for £50 million? He was caught in the reduction of the supply of money, which started in July 1973 when interest rates began rising quickly and special deposits were called in. He was caught in that clamp. I hope that the hon. Member for Meriden will avoid blaming speculators in future.
My hon. Friend the Member for Aylesbury (Mr. Raison), with his customary eloquence and elegance, referred to Adam Smith's "The Wealth of Nations" and spoke of the principles by which taxation should be imposed. I wish to refer to one of the principles to which my hon. Friend did not refer. That is the principle of certainty about which Adam Smith said:
The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise, every person subject to the tax is put more or less in the power of the tax-gatherer, who can either aggravate the tax upon any obnoxious contributor, or extort, by the terror


of such aggravation, some present or perquisite to himself. The uncertainty of taxation encourages the insolence and favours the corruption of an order of men who are naturally unpopular, even where they are neither insolent nor corrupt. The certainty of what each individual ought to pay is, in taxation, a matter of so great importance, that a very considerable degree of inequality, it appears, I believe, from the experience of all nations, is not near so great an evil as a very small degree of uncertainty.

Mr. Ivor Clemitson: I have fore-armed myself with a copy of "The Wealth of Nations" from the Library, since Adam Smith seems to be much in vogue today. I was interested that the hon. Member and his hon. Friend the Member for Aylesbury (Mr. Raison) failed to quote from one of the canons of taxation about which Adam Smith wrote 200 years ago when he said:
The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities;
Would the hon. Gentleman care to comment on that?

Mr. Budgen: I have not misled the House. I quoted only one of the canons and I accept that, in many respects, they are mutually contradictory. I admire Adam Smith; I do not worship him.
The great construction industry has been messed around over the last two and a half years. It has no idea what tax it will pay at any one time. My hon. Friend the Member for Melton (Mr. Latham) talked about changes every three years, but it has not been like that.
In April 1973 we had a White Paper which suggested a land hoarding charge. The industry thought that that would be implemented, until it was dropped at the beginning of 1974. On 17th December 1973 the present Lord Barber introduced his proposals for a development gains tax, but that did not become law until 31st July 1974. It had retrospective effect to 17th December and people had no knowledge of what their tax liability would be under DGT. Indeed, there were some changes between December and July. The hon. Member for Chorley (Mr. Rodgers) has described the development gains tax as a Tory tax, but it was no such thing. It was suggested by Lord Barber, but was introduced by the present Government.
When the Government were going through their White Paper period, trying to tell everybody about the "Promised land, on 12th September. In that White 1974, they published a White Paper on Land, on 12th September. In that White Paper the Government put forward their proposals for the Community Land Bill and for the development land tax.
Then we had the Community Land Bill, and the House will recollect how that Bill was changed fundamentally in Committee. That was not enough. The White Paper on the development land tax was published in August 1975, and it included a draft Bill. It would be too much to expect the Government to stand by that draft Bill. That would be giving too much certainty. They seemed to want to make building houses as difficult as possible, perhaps because too few intellectually satisfying activities were available. So along came the next attempt to help the industry to improve its understanding of these matters.
This Bill is dated 25th February 1976. We understand that it has been considered by the Treasury, and it is about twice as long as the previous Bill. What a terrible story of interference, distortion and aggravation for a great industry! What would Adam Smith have thought about that in terms of certainty and trying to give business men the confidence they need to enable them to risk their money? At a time of 25 per cent. inflation rate they had to contend with all these legislative changes and threats of further changes. Business men do not need to be good at developing: they need to have first-class degrees in tax law.
That is still not enough. The Minister says that he is not satisfied that it will be possible to deal with all the taxing matters in the Development Land Tax Bill. So that there may be more uncertainty, which he calls, in the modern jargon, "flexibility", he tells us that there will be regulations under the Development Land Tax Bill and further regulations under the Community Land Act. This great industry will not know what it is doing. The hon. Member for Chorley described development gains tax as being a Tory measure. It was not.

Mr. George Rodgers: The measure was brought forward by Anthony Barber,


a member of the then Conservative Government. The Labour. Government's purpose is to eliminate that Act.

Mr. Budgen: I concede that the idea of the development gains tax was put forward on 17th December 1973 by Mr. Barber, as he then was, but the tax was introduced in the Finance Act 1974, for which the present Government took responsibility. It does not lie in the mouth of the Treasury team to say that there are significant changes in this tax which improve upon the development gains tax. If the Government thought that it was a defective tax when they came to power, it should not have been introduced.
It is no good inviting the House, or the Committee later, to consider interesting arguments comparing development gains tax and development land tax. The development land tax affects the employment of ordinary working people. Builders are saying that they do not know where they stand with the tax and that it is unsafe to lay men on. That is the central scandal, and I hope that the House and the country will be shocked by the Labour Party's having taken so little interest in this piece of legislation.
I suspect that the Government desire to see the development gains tax thrown away because they wish to be seen to be doing away with anything that can be described as Tory legislation. I give the House an example. In 1974 we heard a lot about the National Industrial Relations Court. The Secretary of State for Employment spoke of the learned judge who presided over that tribunal as being a trigger-happy judicial figure. We assumed that once that legislation was thrown away, nothing like the NIRC would ever be seen again on the statute book. But no: we now have the Employment Appeal Tribunal doing much the same job, again chaired by a High Court judge, and allowing Labour Members below the Gangway to go to their constituencies at the weekend to explain how they have done away with Tory legislation.
The property industry has been messed around for the last two-and-a-half years for the merest party political advantage. It is the ordinary people who are unemployed and who want houses who are being harmed by this tomfoolery. The extra cost will be borne by the ordinary

people. There will be the extra cost of employing lawyers, more accountants, and the extra cost of employing narks and spivs who will have to find the land, tell the local authority about it and try to get a special position under the prior rights procedure. Once again we shall find that where there is interference in a market—[HON. MEMBERS: "Oh."].

Mr. Deputy Speaker: Order. Hon. Members must not aggravate the hon. Member for Wolverhampton, South-West (Mr. Budgen). He is speaking in sorrow, not in anger.

Mr. Budgen: I am very grateful to you, Mr. Deputy Speaker. Perhaps I am getting warmed up.
Interference in the market always tends to have an unexpected effect. One reason for the great boom in London property values in the early 1970s was the halt in office development ordered by Lord George-Brown when he was in charge of the Department of Economic Affairs. He stopped the supply of office accommodation and did property developers a good turn.
I end upon my note of sorrow. This attempt will mess around a great industry. It will create and continue unemployment and it will have the reverse effect to that intended. It is sad that once again we cannot leave this industry alone. It is, I suspect, for no other reason that that no party in the House can face the fact that politicians alone create inflation.
We look to the property industry, which at some stages benefits from inflation, as being the cause of inflation. Neither the property industry nor the speculator causes inflation. We, and we alone, cause inflation. We should accept the blame and not attempt to pass it on to others.

8.9 p.m.

Mr. John Lee: I agree with the comments of the hon. Member for Wolverhampton, South-West (Mr. Budgen) upon the complexity of the Bill, although there is little else on which I am in agreement with him. The hon. Gentleman says that we politicians are responsible for inflation. He is right only in the sense that sometimes we pursue policies which lead to it, but he should take a leaf out of the book


of his illustrious predecessor in Wolverhampton, South-West, the right hon. Member for Down, South (Mr. Powell), who attributed inflation in large measure to the money supply. That would seem to be one thing upon which the right hon. Member for Down, South might well be heeded rather more often than he is.
This Bill is indeed a piece of complicated legislation, with 47 clauses and 165 pages, and one contemplates with some apprehension the difficulties that there will be about its interpretation. In a perfect world a tax system would be simple, but I do not think that we have had a simple tax system for many years. We are certainly long overdue a major revision of taxation law, such as the Income Tax Act 1952. But we might also do well to have some revision of the Law of Property Act 1925.
I have a feeling that we shall not solve the problem of land availability until we have a cool hard look at the nature of land ownership. The trouble is—and this is a criticism a number of us have of the Bill and of the actions of this and previous Governments in the fiscal history of the last 30 years—that the fiscal process is an inadequate substitute for fundamental changes in the ownership of property.
The Bill seeks to establish an equitable and at the same time effective and enforceable rate of tax having regard to the values that accrue to land as a result of other people's activities. I think that that puts in simple terms what the rationale of the Bill is. The trouble is that by the nature of things it is enormously difficult to be fair and effective in taxation. Even if the hon. Member for Melton (Mr. Latham) could have given me the assurance for which I asked—that if this Bill becomes law, we can at least see that it is left alone—which he quite rightly could not give, for a very long time there will be difficulties of interpretation of the law of ownership and therefore uncertainties as to the incidence of taxation.
I do not think that the Government have yet fully realised, and needless to say the Opposition have not, that in many parts of the world the concept of fee simple ownership is alien. Probably to most mankind it is totally incomprehen-

sible. The idea of individual ownership has little place in African land law and in parts of South-East Asia. For a very long time in our early history, certainly till about the thirteenth century, it had little place in this country, because we had a system of subinfeudation instead of the principle of individual ownership. The principle of individual ownership it self is therefore a modern concept. The very term itself alludes to the fact that there is a residuary quite apart from statute which still in theory vests in the Crown.
It found its echo in one or two modern aspects of the law. For example, the fact that after a number of the possibilities have been exhausted in the law of intestacy, the ultimate reversion of the land is to the State is itself subconscious recognition of that ancient principle. I hope that eventually we shall have a situation—I will not say "God gave the land to the people" because I do not believe in God—in which Parliament by Act will take such a measure on behalf of God, if he ever existed.
I represent part of a city one of whose most famous citizens was Joseph Chamberlain. I join my right hon. Friend the Home Secretary in regarding Joseph Chamberlain as one of the most abominable people who ever sat in this House. But Chamberlain did do one or two useful things. He set up a municipal bank and he acquired a great deal of land for the city of Birmingham. In many ways the city has benefited very much from his foresight in the years in which he was uncrowned king in the 1870s. Unfortunately, his successor Conservatives there are not so enlightened and have spent a great deal of energy flogging the land down the river—actually there is no river in Birmingham, so let us say that they have flogged it down the Grand Union Canal.
The result is that if we want to acquire land in Birmingham without the benefit of this Bill, the local authority will have to pay through the nose. But that does not exempt the Government from the need to look at the law properly and to see whether by changing the nature of the concept of ownership we cannot eventually—dare I say, at a stroke?—end the idea of private ownership of land other than the obvious exceptions such as individual house ownership.
I can give an example of the way that has been done. In the old Gold Coast in 1921 the Land and Native Rights Ordinance was passed. That piece of legislation nationalised at a stroke all land in the northern territories protectorate of that country. Thereafter all dispositions of the land for any purpose had to be referred back to the Government, and the Government were the ultimate reversion.
There was another part of the Gold Coast where the same thing applied. After the end of the Ashanti wars a number of people in Ashanti who had been pro-British quislings during those wars were resettled outside their territory. It was thought unwise to leave them in their territory—just as the United Empire Loyalists had to be resettled outside the United States after that lamentable event of 200 years ago. Indeed, there were two lamentable events in 1776: one was Adam Smith and the other was the United States.
However, after the Ashanti wars, the people of Juaben-Edjweso were resettled in the Akwapim district. The condition of resettlement was that all their land could be held as tenants at will and could be acquired by the Government, again at a stroke. That is another example by which we could simplify the use of acquiring land. No system of taxation that we can introduce can be sure of survival of the Government who introduce it and no system of taxation was ever likely to be very simple.
What I am hoping for from the Government is some kind of undertaking that we shall set about progressively acquiring all land for development and seeing—here I agree with the hon. Member for Melton—at any rate as an interim measure that local authorities should be able to acquire all the land they need by compulsory acquisition at existing use value. If we encourage them in that, at any rate under Labour control, we may go a long way towards getting land into public ownership in advance of the revision of land law generally. It is long overdue, since it was last undertaken in 1925.
Whether I shall get the assurance that I want from the Minister I do not know, but he should be aware that although many of us welcome the Bill so far as it creams off a good deal of the value that

the Community has created, we do not regard it as a substitute for a fundamental and irreversible change in the disposition of wealth. I am sure that my hon. Friend will bear that in mind, unlike the Chancellor, who, to judge from the events of last Thursday, seems to be undergoing a certain amount of emotional strain. The Minister should remember that a tax will not last for ever, that its rates will not be fixed for ever, and that legislation is much more difficult to unscramble than rates of taxation.
This is the answer to the Manifesto brigade. If its members believe that they can make a fundamental shift in the resources of the community by taxation, they are disregarding the fact that it is fairly easy for tax rates to be changed retrospectively. Although not impossible, it is much more difficult to change a statute.
I give a qualified welcome to this complicated Bill and to some at least of the concessions which have been made. Some are reasonable, but some of those for charities are not. I hope that the Bill will get a Second Reading by the kind of majority it deserves.

8.22 p.m.

Mr. Ian Stewart: After a speech of such quality from the hon. Member for Birmingham, Handsworth (Mr. Lee), I hope that the House will not expect me to follow him into all the intricacies of subinfeudation—

Mr. Deputy Speaker: Order. I hope that the hon. Gentleman will not follow that speech, because most of it was irrelevant to the debate.

Mr. Stewart: Without wishing to comment on the hon. Member's speech, I am relieved to have your dispensation, Sir, not to have to follow up some of his threads.
I should declare an indirect interest in the subject of the Bill as a director of a bank which, as part of its business, lends or has lent for the development of houses, factories, offices and so on over a number of years. That interest has given me also some experience of the way in which commercial decisions taken by people who enter commercial activity may be affected by the Bill.
That suggests to me that the Government would do well to heed the warnings


of those groups which have submitted, and no doubt will continue to submit, their representations about the damaging effects of the rates at which the tax will be charged. Every tax has its own nature and its own impact, but in this case everything seems to have been overshadowed by the fact that the tax is designed to be only transitional and to lead on to the Community Land Scheme.
Several of my hon. Friends have emphasised the great advantage that there would be to all concerned if a common approach could be agreed to taxation and legislation for development land. Unfortunately, the Government are under the extraordinary impression that the Community Land Scheme will work. While they believe that in five or 10 years the Community Land Act will come into play in the way contemplated, any opportunity of discussing the development land tax in its own right is completely prejudiced.
I wish that the Government could accept that there are points of agreement between the two sides about the need to tax betterment or the gains arising from planning permission but that such agreement does not extend to an approach to the whole ownership of land involved in the Community Land Scheme. It would then be possible to work out a framework of legislation, perhaps even based on the Bill, which would have a reasonable chance of survival beyond the life of one Government. It might be difficult to agree on rates, but even that might not be impossible if it were felt that both sides were willing to allow some stability which would be such an immense gain to the industry in coming years.
Since we shall not be able to persuade the Government of this, it seems a sad lost opportunity to develop the common approach that we need. After all, we accept that planning gains should attract some special tax. My hon. Friend the Member for Hornsey (Mr. Rossi) stressed that in the debate on the Ways and Means Resolution. But all sorts of doubts arise when one considers the details and the scope of such a tax. After all, is it appropriate to deal with housing land in the same way as land for factories and offices, with land outside towns and cities in the same way as land within them, especially considering the questions about single

plots and infilling and other points raised in the debate?
Another important change which the DLT introduces when compared with a development gains tax is that it produces a similar result whether the owner of the land is a person or a company. From many of the comments made, it seems that many hon. Members feel that the position of companies whose business it is to build houses or factories is entirely different from that of the windfall gain obtained by personal owners of land who, by the stroke of a pen, get an unexpected and often substantial gain.
Different views may be held about all these factors and about the rates of tax and, although it is inevitable in a debate of this kind that the specific rates of tax are discussed, there is no absolute reason why these rates themselves should be regarded as fixed for all time regardless of the circumstances in which they are expected to operate.
The ingredients of all taxation and the levels applied to that tax depend on the economic, political and social background of the time. It is accepted by many of us that there was an over-reaction at the end of 1973 to high land prices, a justifiable social reaction against them, and even a delay in Government response. When my hon. Friend the Member for Hornsey said that we would not have introduced or retained a tax at a level as high as 83 per cent., he was merely recognising the reality that for any length of time under changed conditions such a rate was bound to have harmful effects. Now we face a tax of 80 per cent. rising to 100 per cent., or the total removal of any benefit from betterment. This is all very well in theory, but will it work in practice?
I ask the House to look at the Government's reasons for introducing the tax and at the reasons put forward by the Paymaster-General for comparing it advantageously with the development gains tax. The right hon. Gentleman made three points. The first was that the development gains tax was erratic in its impact because it ranged from a rate of nil to 83 per cent. according to personal circumstances, whereas the development land tax would be at a standard charge. Secondly, the right hon. Gentleman said that the


development gains tax was limited in its scope, especially because it excluded trading profits, so making a differential between individuals and companies. Thirdly, he said that the development land tax was a way of bringing benefit to the local community.
What about the concept of a standard charge? The Paymaster-General said of the development gains tax that the variations in the rate were inappropriate for a tax on values created by the community. That is the theory, and I have no doubt that it accords with Socialist philosophy. However, he went on to say that between nil and £10,000 there would be no tax, that for the next £150,000 there would be a charge at the rate of 62⅔ per cent., and that the reason why he introduced these concessions was that we should not do anything which might impede or delay the recovery of the land market.
There is the practical Minister speaking instead of the theorist. Two threads run throughout the construction of the Bill. There is the conflict between the Socialist theory of uniform rates of taxation on betterment and there is the practical need not to gum up the building and development industry any more than it is already.
The second point which the Paymaster-General made was about the limitation of the scope of the development gains tax in that it excluded trading profits. He said in favour of the development land tax, on the other hand, that it was comprehensive and covered gains in whatever form they were realised. But it does not only do that. It covers gains which have not yet been realised, by the deemed disposal which takes place when the first trench is dug. By imposing taxation on every individual project which is undertaken by professional companies, the Bill deprives them of the offset of losses against profits from one scheme to another.
It may be that the Government intend that. But the practical consequence is that it increases the threshold of value which any developer must have in mind before he undertakes a scheme. After all, the betterment element in the value was a useful buffer in uncertain times which many companies took into account before deciding to go ahead with a development. If this does not apply, however

many developments there have been of commercial premises, factories or housing estates, there will be that many fewer in future. Perhaps that is what the Government want. If it is not, they should bear in mind that that will be the consequence.
The Paymaster-General emphasised that this was a comprehensive tax. But, quite rightly, it excludes private dwelling-houses. However, it makes nonsense of any attempt to justify other detailed parts of the Bill on the basis that the tax must be comprehensive or not at all.
The third ground advanced by the Paymaster-General was that the community should gain a benefit. Yes, but there are many ways of doing it. At this stage I shall not rehearse the suggestions which have been made in the debate, but it is the case that any authority which is likely to gain financial benefit from bringing land forward for development will want to maximise the eventual revenue for itself. This will give rise to the development of green fields and not the infilling mentioned by so many hon. Members on both sides of the House.
Just as with their planning preferences, local authorities find it easier to designate for development areas on the perimeters of towns than the piecemeal sites in their centres. I have a very serious example of this in my constituency where the new town of Stevenage is now proposed to be expanded. A tongue of urban development is to go through good agricultural land directly between the two farming villages of Graveley and Weston, and the expansion of Stevenage is due to take place not because it was not large enough orginally but because too low a density of development within its borders has taken place over the past 25 years, and now some of the farm land round it has to be eaten up. That may suit Stevenage Development Corporation or the borough council, but it does not suit the local community.
Has it ever occurred to Labour Members that what is favoured by corporations and councils on financial grounds of convenience may not be of automatic benefit to local people, and that what is of benefit to one council may be damaging to an adjacent area, as it is in the case of Stevenage and the rest of North Hertfordshire?
So the three so-called advantages described by the Paymaster-General in defence of the development land tax, as opposed to the development gains tax, are imaginary. The development land tax is not being introduced at a uniform rate, for good reasons which we support. It is not comprehensive, for good reasons which we support. It is very doubtful whether it would be of unmixed benefit to local communities, or the only means of achieving such benefit.
What will it achieve, therefore? We must judge the proposals according to practice, not theory, and there are four essential tests for the tax. Will it restore or help to restore confidence in the battered building industry? Will it encourage the provision of finance for and investment in building and development? Will it give rise to the readier transfer of land which can be developed from its present owners to those who are in a position to develop and build upon it? Will it lessen or contain the cost of development, and so, too, the ultimate price of property, the cost of mortgages and the level of rents? The answer to all these questions, I fear, is "No". Instead it will bring about delay and expense, and on all these counts it will aggravate the crisis in the building industry.
Faced with such a tax and the threatening cloud of the Community Land Scheme, which has dictated the shape of the tax and made it so inflexible, I fear for the prospects not only of the building industry but for essential development in this country for the coming years.

8.38 p.m.

Mr. Ioan Evans: I shall make only a brief contribution in the debate, because I see that my hon. Friends the Members for Birmingham, Erding ton (Mr. Silverman) and Fife, Central (Mr. Hamilton) are hoping to speak in the debate. It is interesting that it should be Labour Members who are seeking to take part in the debate, not the Conservatives. We were to have expected a great fight against the Bill, but that has not emerged from the Conservative Benches tonight.
I welcome the Bill and support its Second Reading. I support my hon.

Friends who would have preferred to go further than the Bill does. I wonder whether the hon. Member for Hitchin (Mr. Stewart) will explain to his constituents in Stevenage New Town how much it has cost the Government and the local authorities to acquire the land for that new town. That is the sort of problem to which we must address ourselves.
The Bill creates a tax to replace the development gains tax. There have been several attempts by Labour Governments to bring the benefit of the development of land back to the community. One of the tragedies of our land legislation was the repeal by the Tory Government of the Town and Country Planning Act 1947—the Silkin Act—an action which led to much of the speculation and profits in land since the war. If that Act had not been repealed, vast fortunes which have been made from development land required for public purposes such as new towns, for the extension of city boundaries, the construction of factories, schools and hospitals, would not have been made.
My hon. Friend the Member for Erdington and my hon. Friend the Member for Birmingham, Handsworth (Mr. Lee) could tell us how much it has cost the ratepayer and the taxpayer to acquire the land on the city boundary to build the Chelmsley Wood housing project. People became millionaires. Hon. Gentlemen opposite might say "Good luck to them. Market forces were operating. That is the free enterprise system in which we believe." But the taxpayer and the ratepayer had to pay in consequence.
Opposition Members have expressed concern about the building industry. What effect have land prices had on house building? The weighted average price per hectare in 1969 was £18,940. In 1972, under the Conservative Government, the price had risen to £39,490—an increase of 68 per cent. on the previous year. In 1973, still under the Tory Government, the price rose to £61,190—a 55 per cent. increase on the 68 per cent. increase of the previous year. That was the situation which the Labour Government inherited. That was the kind of speculation which was allowed by the Conservative Government. In the second half of 1975, before the Bill was introduced, the average price per hectare was


down to £39,880—a 34 per cent. reduction on the situation under the previous Administration.
I am reminded of an old rhyme in Labour history:
The fault is great in man or woman
Who steals a goose from off a common;
But what can plead that man's excuse
Who steals a common from a goose?
That has happened throughout our history. People have been allowed to get away with it. It is time that a measure such as this was brought before the House.
Opposition Members talk about curbing public expenditure. Do they not want to curb the expenditure of local authorities and of the Government? Through the rate support grant and the rates, they are having to pay the heavy burden imposed on them by the present system for obtaining land. It would be interesting to discover what the Centre for Policy Studies might decide if it looked into this matter.
The House should pass this Bill urgently. Delay will lead to holding up industrial development and the supply of land for housing. There is no point in the Opposition crying crocodile tears for the building industry. We are going through a world recession. I should be with the Government wholeheartedly if they could bring forward a plan to increase house building still further. The cost of land is inhibiting housing development.
There has been considerable discussion about the Bill. My right hon. Friend the Paymaster-General said that the Inland Revenue published a statement on 4th February 1975 describing the proposals in some detail. That was followed in August 1975 by the White Paper on the development land tax. There has been considerable opportunity for discussion of this measure.
The Welsh people are pleased that the Government have brought this measure before the House. I understand that the Minister of State, Treasury—my hon. Friend the Member for Llanelli (Mr. Davies)—is to reply to the debate. As he knows, the Community Land Act has been greatly welcomed in the Principality, particularly as it contains a section which sets up the Land Authority for Wales. That will cost public money. It is proposed that we should raise revenue for

that purpose, and this Bill provides a method of doing so. The Welsh national anthem is "Land of our Fathers". At long last the benefit of the land is coming back to the people, and we welcome the steps proposed in this Bill to enable that to be done.
The Opposition amendment included the words:
while accepting that increases of land values resulting from planning decisions should bear a special tax …".
In other words, the Opposition admit that something has to be done. Yet when the Conservatives were in power, they did not deal with the problem. The main purpose of the Bill is conceded.
The amendment goes on to say that the Bill will
in many cases impose tax liabilities before profits or even returns from development can be realised".
That point has been fully answered by my right hon. Friend the Paymaster-General, who said that development land tax is concerned with the increase in the value of land which is created not by any particular person but by the efforts of the community.
One of the objectives of the Government's community land scheme is to reduce the cost of land to local authorities. Is there to be opposition to that objective in this House? Are hon. Members to go back to their constituencies and local authorities and say "The Government are taking measures to bring down the cost of land and we are opposed to such a measure"?
I hope that the country at large will appreciate the situation in the run-up to the municipal elections, that the taxpayer and ratepayer have been held to ransom when local authorities have sought to buy land. We should remind the country of the Tory Party's attempt to hold up this measure, which is in the short, medium and long-term interests of the people.
It is no use hon. Members opposite talking about pension funds, because it is the beneficiaries of pension funds who pay rates and taxes. We know that vast fortunes have been made by people who support the Tory Party and that those fortunes have been made at the expense of the ratepayer and taxpayer. I should like to hear from the Opposition what action they would take if they were in power. If they do not agree with the


present Government's proposals, what alternative would they put forward? The methods so far adopted by them have been tried and have failed.
The Bill does not go as far as I should like. It is a pity that we have not introduced a Bill to bring about the public ownership of land. But at least this modest measure, whose object is to give the benefit to the people who pay for development, should receive the support of all those who are concerned for the welfare of the citizens. I hope that the Bill will not be long delayed in Committee and that it will soon become the law of the land, giving back to the people what is their right.

8.50 p.m.

Mr. William Hamilton: I shall take no more than a few minutes, but I wish to refute at the outset any rumour that I want to be on the Committee which deals with this Bill. In the first place, I agree with the hon. Member for Wolverhampton, South-West (Mr. Budgen) when he suggests that legislation on these matters seems inevitably to be obtuse and incomprehensible to poor, ignorant Members of Parliament such as myself, and still more, I suspect, to the average councillor who has to implement it.
I wish to put on record an example of what I mean. I shall quote at some length from Schedule 6 so that the House and the country may get the message. Here is paragraph 3(4):
If, in a case where this paragraph applies, the consideration for the principal DLT disposal (in this paragraph referred to as "CD") exceeds the consideration for the principal CGT disposal, as determined for the purposes of tax on chargeable gains, paragraph 1(1) above shall have effect as if the reference therein to a sum equal to the amount of the chargeable realised development value which accrues on the DLT disposal were a reference to a sum equal to that fraction of that value of which the numerator is the consideration for the CGT disposal, as so determined, and the denominator, subject to sub-paragraph (5) below, is CD.
So far so good. That is clear to everyone. But then we turn over the page to sub-paragraph (5):
If, in a case where paragraph 1(1) above has effect in accordance with sub-paragraph (4) above,—

(a) the relevant interest is itself a lease, and

(b) the principal disposal is the grant of a sub-lease,

the denominator in the fraction referred to in that sub-paragraph shall be CD—(HR×F) "—
and it then goes on to define "HR" and "F".
That is why I do not want to be on the Committee which discusses the Bill, and that is why the Chamber is empty, too. The House instinctively shies away from something which might as well be written in Chinese. Little Chinese minds invented the verbiage in the Bill, and that is a great pity, because we are here dealing with a "gut" issue, an issue which should clearly differentiate the philosophy of the Labour Party from that of the Tory Party.
The fundamental capital asset of our country is the land. We have had legislation by successive Governments, and threats by successive Governments to repeal the legislation of their predecessors, and no one is any nearer a solution to the problem than we were 30 years ago when the father of the author of the present Bill introduced and piloted through the House a measure which no one else—perhaps not even he himself—understood, the Town and Country Planning Act 1947. We are back there again, and I greatly hope that the Government will solve a problem which has been beyond solution for successive Governments over the past 30 years and well before that.
We have had quotations, either called in aid or called in contradiction, from Lloyd George, from Henry George and all sorts of other Georges. We have heard from Adam Smith. Adam Smith was a native of Kirkcaldy, in Fife. To judge from his speech, the SNP spokesman, the hon. Member for Perth and East Perthshire (Mr. Crawford), took to heart everything that Adam Smith wrote. He said that Adam Smith's theories were relevant to the problems of Scotland in this matter. He went on to say that in Scotland there was no such thing as profiteering in land.
I do not know where the hon. Gentleman has been for the past few years, especially since North Sea oil was found, because the most speculative profits have been and are being made on land in the North-East of Scotland and round that part of the Scottish coast where oil has been discovered. If there is one


area of the United Kingdom where complete nationalisation and public ownership of land would be accepted by the vast majority of people, it would be in Scotland, particularly in the Highlands and in the hon. Gentleman's constituency.

Mr. Crawford: I did not say that there was no profiteering. I said that there was less than there was in the South-East of England between 1960 and 1964 and 1970 and 1973.

Mr. Hamilton: The hon. Gentleman had better read what he said. He gave the impression that he was a captive of the Scottish Landowners' Federation and that he was a spokesman for that federation in this debate. The SNP and the Tory Party believe that land should be in private hands and exploited for private profit. We believe that, because land is such a scarce resource and we are so densely populated, it is important that the value that accrues from land should go to the people. That is what the Bill is trying to achieve, but it is drafted in such incomprehensive language that no one can be sure that we shall succeed in our time.
It would be as well for hon. Members to look at the report by the right hon. and learned Member for Huntingdonshire (Sir D. Renton) on the clarity of the language in legislation of this kind. If we had a pre-legislation Committee of the House to discuss such measures before they reached the House, so that hon. Members could understand them more easily, we would have better and shorter legislation and we would put a lot of lawyers out of business. The people who will profit most from the Bill are local authorities and lawyers.
I can speak on behalf of Kirkcaldy, the birthplace of Adam Smith, because my agent is the chairman of the land and resources committee. He is just waiting to get the Bill on to the statute book, and then we can get after a certain gentleman called Captain Wemyss and the feudal land ownership that still exists in Fife and many parts of Scotland, including the constituencies of the two SNP Members who are present in the Chamber, the hon. Member for Perth and East Perthshire and the hon. Member for Galloway (Mr. Thompson). They know that local authorities, certainly Labour-controlled authorities, are anxious that

this legislation should reach the statute book.
With all its shortcomings and all the doubts expressed about it, the principle behind the Bill is sound. It involves a fundamental principle which divides the Labour Party and the Conservative Party. The Labour Party believes that land belongs to the people, that it should be returned to the people and that the rewards from it should accrue to the people. In so far as the Bill underlines that principle, we hope that the House will support it. We will be interested to see into which Lobby SNP Members go tonight.

9.0 p.m.

Mr. Graham Page: To take up the remarks of the hon. Member for Fife, Central (Mr. Hamilton), I must at once declare an interest: I must admit to being a lawyer. I rather agree with the hon. Gentleman that the Bill will provide a lawyer's feast. I must declare another interest in that I am a company director of a property company, although I am not a shareholder.
The opening words of the explanatory notes read:
The Development Land Tax Bill … gives effect to the Government's proposals to impose a new tax on development value realised from land 
That is the opening of the booklet issued by the Board of Inland Revenue. The immediate question is why we should have a new tax. We already have two forms of taxation on gains from the increase in the value of land. There is capital gains tax and development gains tax. Perhaps I should not have said that we have two forms of taxation because there is income tax and corporation tax on those who deal in land.
The new tax is to take the place of development gains tax—namely, a tax upon any increase in the value of land between acquisition and disposal other than the increase in current use value. The justification—this has been said repeatedly during the debate—for a tax on an increase in the value of land is said to be that the increase stems from the community and, therefore, the increase in value should be returned to the community.
That argument is not always quite logical. Frequently, the increase in the


value of one piece of land results from restrictions placed on neighbouring land. If we are to be logical about returning the increase, we should return it to the neighbour who has lost value in his land rather than to the community.
It is not necessary to subscribe fully to the principle of returning the increased value to the community to believe that gains from the increase in the value of land should be taxed. That was said by my hon. Friend the Member for Aylesbury (Mr. Raison) when he took up the remarks of the Paymaster-General. Our objections to the tax as set out in the Bill are that the rate is penal and that the form will impede development.
At one time, to make land available for development was praiseworthy. The landowner-vendor who made his land available for house building, factory building or school building, for example, was thought to be doing good. Then the administration of the town and country planning legislation caused too many windfall gains and the praise of the landowner-vendor turned to condemnation.
I return to the situation shortly after the Second World War. In 1947 and 1948, the Labour Government decided that they would buy up all development value for the global sum of £300 million. That scheme succeeded in getting the Labour Government out of office. The next Labour Government decided to proceed by confiscating part of the development value every time land changed hands by the betterment levy. That succeeded in getting that Government out of office. The third time——

Mrs. Elaine Kellett-Bowman: Third time lucky.

Mr. Page: I do not say that, exactly. On the third occasion the Labour Government found laid on the table a draft Bill to provide for the taxing of any increase in the value of land. Treasury Ministers pushed that on to the statute book.
I am glad that the right hon. Gentleman the Minister for Planning and Local Government is present, because I wish to refer to him—and, I hasten to add, in a kindly way. The right hon. Gentleman devised a straightforward, logical proposition to buy all development land at

current use value. In other words, development value, without any messing about, was to be obtained for nothing—we can call it 100 per cent. development land tax. In reality, it is compulsory purchase at a fraction of market value.
The right hon. Gentleman rightly knew the extreme unpopularity of the previous Land Commission. He had been Chief Whip, so he had a political nose for these things. As a result he said "Instead of this big bad Land Commission that comes along and gobbles up all the land, let it be the democratically respectable local authorities that will receive the land in this case". That was a nice logical theory on paper. Therefore, we had the Community Land Act 1975.
However, the right hon. Gentleman was quickly told that a 100 per cent. development land tax—in other words, compulsory purchase at current use value—would not work. To begin with, local authorities could not cope with it and, if they did, development would be at a standstill. Therefore, he abandoned compulsory purchase at current use value, or at least put it in deep freeze for 10 years.
Rumour has it that the second appointed day of the Community Land Act will not be for that length of time. At any rate, in 10 years' time there will not be a Labour Government in office. I think I can safely say that that scheme has now been abandoned.
After the abandonment of that fundamental factor of the great land grab, what was left? There was no longer the command to local authorities "You shall buy all the development land at current use value". Instead, we have now under the Community Land Act the statement to local authorities "You may buy development land at current use value plus one-fifth of the development value"—that is to say, a tax of 80 per cent.
To make that kind of system work, a local authority on paper buying land at market value and deducting the development land tax and paying only the net purchase money must have a certainty about how much it shall knock off the purchase price. Once we start to talk about deducting from market value the tax liability of the vendor, that certainty goes. It depends on the tax rate of the vendor, his personal allowances and all the rest of it. If we went on to a tax


under this scheme the local authority would have no certainty about what it should deduct from the purchase money. Therefore, the so-called tax must be at a flat rate—in fact, a form of levy.
The Minister for Planning and Local Government must then have heaved a sigh of relief, because his original scheme had some shred left in it if 80 per cent. was to be knocked off the market value of the purchase money. But I fear that his Treasury colleagues have not finished bashing him about, because it was obvious that the 80 per cent. would have the effect of drying up the supply of land.
It is no good saying, as some hon. Members have said, that the Bill will not dry up the supply of land. The hon. Member for Isle of Wight (Mr. Ross) said that he did not think the Bill would do that. We have the assurance in the statement of the Paymaster-General that he was informed that the 80 per cent. rate would diminish the supply of development land available for housing purposes and therefore he had decided to reduce it promptly to 66⅔ per cent. There is no doubt that a tax around these figures will have the effect of drying up the supply of land. It is a matter of opinion whether a tax at 50 per cent., 60 per cent., or 80 per cent. will have that effect. At any rate, a tax of this sort will have its effect on preventing land coming forward.
The Treasury decided on this rather peculiar way of dealing with things by using a tranche of £150,000 which was to be subject to 66⅔ per cent. only for three years. This is a temporary measure. We are to have the 66⅔ per cent. rate for only the first three years of the operation of the measure. This is not a sufficient reduction to provide an incentive for a good supply of land. It is 70 per cent. more than betterment levy in its time and that certainly caused land to be withheld.
It produces uncertainty in the mind of a local authority. It gets back to this uncertain point when the local authority does not know what it has to deduct from the market value when paying purchase money for the land. Under these provisions the local authority has to investigate whether the vendor during the year is chargeable on more than £150,000.

Dr. Phipps: If I understand the right hon. Gentleman correctly he is suggesting that someone who owns agricultural land worth £1,000 an acre would not be prepared to pay 66⅔ per cent. tax on his gain if he is offered £10,000 per acre, even though he will be left with a price substantially in excess of the £1,000 an acre which he would get at ordinary agricultural market value.

Mr. Page: That was what was recognised by the Paymaster-General when the figure was 80 per cent. I said that it is a matter of opinion whether 66⅔ per cent will produce the land when 80 per cent. will not. The point I was making was that if we had this tranche of the first £150,000 of development value at a lower rate than the rest, the local authority is still in doubt as to what it ought to deduct in paying purchase money. The Treasury said "Let us make it certain". It produced this extraordinary Clause 38 which says that the local authority shall:
on paying the consideration for the disposal, make a deduction in accordance with this section on account of any development land tax for which the chargeable person may be liable on disposal.
It then goes on to say that the Board of Inland Revenue:
may by regulations made by statutory instrument make provision for supplementing the provisions of this section and that Schedule and, in particular, with respect to—

(a) the determination of the amount of the DLT deduction in any case."

One imagines a covey of commissioners sitting in some comfort on the 20th floor of the "Palace of Middlesbrough" where I understand the administration of this tax is to be set up, pulling figures out of a hat or a bag, rather like the FA Cup draw, saying to the local authorities "On this transaction you shall pay £X and on this transaction you shall deduct £Y." There will be rules and regulations, but so far these are top secret. We do not know what is to be put into those regulations. They certainly are not included in the Bill.
I welcome the Paymaster-General's statement that in Committee he might contemplate putting those regulations into the Bill. If the amount to be deducted by the local authority is to be settled arbitrarily by the Inland Revenue the whole purpose of the flat-rate levy goes


and the road is open to meet the request of organisations such as the Association of County Councils that the net payment system should be abandoned and that local authorities should pay in full and leave the recipient to be assessed in the ordinary way.
I have gone through those provisions to show that this tax started as being geared entirely to the Community Land Act and that the reason for a flat-rate levy has gone. Surely the reasonable way to arrange for payment is for the amount of development land tax to be assessed before the development proceeds and that it be paid eventually out of the proceeds of that development—in other words, to treat it in the ordinary taxation manner as a tax chargeable on income and not a levy on the valuation of future receipts.
The Paymaster-General began his speech by saying, "This is a tax". I ask him to consider this proposition when we are dealing with the Bill at a later stage: why not have the simplicity of taxing the net gain from land values as if they were the top slice of income but with a stop at whatever limit figure is chosen? That seems to me a reasonable way of dealing with the matter.
I realise that the Bill tries to get the Government out of the odium which the previous Labour Government earned when, with the betterment levy sledgehammer, they attacked the ordinary man of modest means. The present Government have tried to avoid that on this occasion. In Clause 12 there is the de minimis provision exempting the first £10,000 of development value; in Clause 14 there is the exemption of the taxpayer's private residence; and in Clause 15 there is the exemption of dwelling-houses built for the family.
I thought that during the Committee stage of the Community Land Bill we had for ever buried the family clause under a mound of ridicule. It was dropped from the Bill, and I congratulate the Minister for Planning and Local Government on abandoning it. I hope that the same will happen during the course of this Bill. We shall try to remove the family clause in Committee and to insert a clause similar to that in the Community Land Act.
The private residence exemption of not more than one acre, including the area on which the house stands, is being niggardly. I suppose that in Committee there will be an amendment altering the one acre to 2 point something hectares, but that will not cure the niggardliness of this exemption.
Under Clause 12 small transactions will be subject to the scrutiny of the covey of commissioners in the Palace of Middlesbrough in order to decide whether the development value is over or under £10,000. May I, in following the hon. Member for Fife, Central (Mr. Hamilton), make a suggestion for simplifying the Bill: why not make the exemption by reference to the amount of sale proceeds or the value of the land, as with development gains? If the Government, in divising this imposition, had adopted altogether the income tax principles, they could have met many of the objections to the levy as it stands in the Bill. The Government are coming round to it gradually, even in the welcome concessions they have made today.
The Paymaster-General said this was to be a tax, so let us apply normal tax principles. If the Government accepted these principles, they would not become the first Government to breach the principle that Churches and charities are exempt from direct taxation. By imposing the levy on the property of Churches and charities, other than that held on 12th September 1974 or developed strictly for their own purposes, the Government are restricting Churches and charities in the provision of services to the community which would otherwise have to be provided by central or local government. Why is there this attack on the work of the Churches and the social benefits they bring to people? Are the Government jealous of the social welfare work of these bodies?
If the Government were not so obsessed with the need for a flat-rate levy in order to make the Community Land Act work, they could meet the reasonable plea of the CBI that there should be relief for losses—that if an owner made a gain on the disposal of one piece of land and a loss on another piece in the same year, he should be entitled, in the normal tax fashion, to set off his loss against the gain. The CBI put forward a very reasonable case for this suggestion and I hope


that the Paymaster-General will think about it again.
Another form of loss is if the assessment is made on deemed disposal when the development starts and building costs rise or fall unexpectedly. Perhaps we should have some indexing or escalation clauses applied to the assessment of the amount of the levy, or some other way of taking into account these losses so that the tax does not work unjustly or unfairly.
The Government could also have accepted another plea of the CBI and other bodies, including the Country Landowners' Association, and allowed a rollover provision which would remove the levy liability if the proceeds of a disposal were reinvested in the same business. I appreciate that some relief is given in the industrial exceptions and this is welcomed, but it is rather grudging in the small print. The property has to be within the curtilage of the existing industrial premises. Why does this apply only to industrial premises? Why not to commercial development, warehouses, shops and offices?
If the Government would only say that this is a tax and not a levy, they would have no difficulty in exempting pension funds, which have always been exempt from tax. The Government are proposing to penalise 12 million workers and their families who have provided the money for the purchase of assets for the provision of retirement benefits. That is the penalty of making pension funds subject to development land tax.
We cannot say that pension funds are not concerned and do not buy land for resale. It was explained repeatedly in the course of the passage of the Community Land Bill that pension funds wished to develop their property when it became out of date. They have about £15,000 million invested in property backing up the retirement benefits which they give. If they are to be tied to the 10 per cent. tolerance, that means entirely uneconomic use of those properties, and they do not get the benefit that they should get for their members from managing those properties.
Do the Government believe that the Community Land Act cannot work unless all pension fund trustees sacrifice the development value of their properties

which have been bought with the money of the 12 million workers who are members of the fund? Unless they hold that fantastic and comical belief, they can no longer deny exemption to the pension funds.
We have stated in the amendment that the tax will be claimed
before profits or even returns from development can be realised".
If a developer is liable for the development land tax as soon as the spade is put in to dig the first sod of the first trench for the foundations, it is said that that does not matter; there will be a year's delay. According to Schedule 8, Part III, paragraph 43 (1)(a), taken together with paragraph 43(2)(a), the landowner developer will be able to pay by instalments spread over less than five years. According to paragraph 44(2)(b) the instalments can be spread over eight years, but in paragraph 44(3)(b) that eight years is cut down to five years. It is cut down to the unexpired period of the planning permission. Planning permissions are not granted for more than five years. I call the attention of the House to the small print at the back of the Bill, as the hon. Member for Fife, Central called attention to many other formulas. Payment before receipt will play havoc with the developers' cash flow and will inhibit development.
The real condemnation of the Bill is that it does nothing to solve the fundamental development problem which faces the country, which is the dereliction of our cities and towns. It not only does nothing to solve that problem: it confounds and obstructs the solution of it. We are told in Cmnd. 6393, "Public Expenditure to 1979–80", that in the next three years local councils under the Community Land Act will acquire 13,100 acres of development land. How many thousands of acres of derelict land within our cities and towns remain undeveloped because of lack of local authority funds? Yet we are told that in the next three years £211 million is to be spent by local councils in buying up more land. They will spend more than £211 million. That is the sum after offsetting the sale of 2,800 acres of land so purchased. The outlay is to be £300 million.
If there is £300 million to spare for financing local authorities to purchase


green field sites, why should it not be diverted to developing the derelict sites in our cities and towns? Future generations will look back at the shame of our generation, our rotting inner cities and towns, and will see that we have been imposing a levy to discourage development and at the same time spending £300 million and diverting our energies into buying green field land.

The Minister for Planning and Local Government (Mr. John Silkin): I know that the right hon. Gentleman will have the answer pat, but I would like to know what percentage of the £80 million that he made available to local authorities went into the general processing of derelict land.

Mr. Page: First, of course, the £80 million was not £300 million. Secondly, it was a specific sum for the development of certain estates, one or two in particular, which had been dabbled with by the Land Commission and then abandoned, and which the local authorities concerned wished to take over.

Mr. Silkin: Answer the question.

Mr. Page: The whole of the £80 million was not taken up. It was for the development of certain specific sites by individual authorities.

Mr. Silkin: How much of it was taken up for derelict land development?

Mr. Page: As far as I know, none of it went to derelict land at the time because it was for the specific purposes required by local authorities in specific cases. If, however, there is £300 million available at present, it is wrong to devote it to buying up green field sites, and a future generation looking back on our rotting city centres will think that under this Government we went stark, staring, raving mad.

9.32 p.m.

The Minister of State, Treasury (Mr. Denzil Davies): We have had a wide-ranging debate, including a number of excellent speeches by my hon. Friends, who have shown clearly that they understand the Bill probably far better than some of the so-called experts on the Conservative Benches. We have had references to Adam Smith, Riccardo and Lloyd George, but I must eschew the temptation

to quote from my illustrious countryman's speeches on land and concentrate on replying on some of the difficulties and details of the Bill.
First, however, I want to speak about a problem which has not been specifically mentioned but which should be mentioned before the Bill goes into Committee—the difficulty relating to disused land. This problem has been raised in representations to us, not least by my hon. Friend the Member for Salford, East (Mr. Allaun) previously. I want to explain the problem and the consideration we are giving to it.
Current use value is defined to include the value of any right to resume past use and so produce, in the case of land which has long been discussed, significantly higher base values and, therefore, higher local authority acquisition costs. This happens because of the planning legislation.
To alter the treatment of disuse to conform and make it cheaper to buy this kind of land would involve considerable problems of the definition and establishment of what had or had not occurred on a particular piece of land. However, the Government are continuing their considerations before the Committee stage of whether there is any fair and practical scheme available for excluding from current use value the right to resume a use after a prolonged period—say, 10 years—of disuse but taking account, of course—and these are the difficulties—of the possible implications of this for local authorities and the owners of such lands, including in many cases nationalised industries.
It is very difficult to work out a simple scheme which is fair as between the owners of land and local authorities, but I say to all those who have made representations that we are looking into the problem before the Committee stage.
The right hon. Member for Crosby (Mr. Page) made considerable play of the argument that, because we have two tranches, local authorities will not know what to deduct. I am sorry to tell him that he has not got it right. I do not blame him for that, because the legislation is complicated and there will be Regulations. But local authorities will know what the provisional reduction will be.
As is laid down in the legislation, it will simply be a tax on the difference


between the money that local authorities will pay to the vendor—the consideration—and 110 per cent. of current use value. Thus, the only calculation that they will have to make is to deduct from the consideration 110 per cent. of current use value and apply the tax rate, which will be 66⅔ per cent., up to £160,000 taking into account the £10,000 exemption, and if the consideration exceeds £160,000 the rate will be 80 per cent. All they have to do is make a provisional deduction according to that formula, and eventually the vendor's liability will be determined by the DLT office.

Mr. Graham Page: I am grateful to the hon. Gentleman for explaining the contents of his Bill, but what he has explained is that there will be many vendors who will have more money deducted than should be deducted from their purchase money and who will have to reclaim their tax years later.

Mr. Davies: Some vendors will suffer from an over-deduction and others will benefit from an under-deduction. If, however, there is an over-deduotion we shall pay interest on it, and if there is an under-deduction the vendor will have to pay interest to the Revenue. We have worked out a fair scheme in consultation with local authorities.
The hon. Member for Aylesbury (Mr. Raison) talked about not-of-tax deductions and suggested that the benefit in the end to local authorities would be only the 30 per cent.—30 per cent.—40 per cent. benefit under the Community Land Act. Much of the land acquired by local authorities will not come under that Act at all. If a local authority buys for public housing or for a school, under our provisions 80 per cent. of the development value of the land will accrue to the local authority. There will be no question of such a split as happens under the Community Land Act. The legislation ensures that local authorities which want to build a school rather than the landowner or farmer who sells the land will receive the development value. We are concerned with a substantial benefit to the local community which in the past has had to pay a high price for its land.
We reject completely the suggestion that charities have been badly treated. All land owned by charities on White

Paper day is completely exempt from DLT. There will also be no development charge on land acquired after White Paper day which a charity develops for its own use. This is a substantial concession in accord with our land scheme and I should have thought that most charities would have welcomed it.
The situation is somewhat different with pension funds. We have not been able to grant them the same kind of concession. But they are in the market as financial organisations, switching their investments from one asset to another. They cannot be compared to charities: they are in the business of maximising their profits. We are not concerned with their rental income. Most of the income of pension funds from land is rental income from investments and that is completely free from tax, as it always has been and will be in future. We are not concerned with their capital gains when they switch investments. Those gains will be completely free from capital taxation. We are concerned with only one kind of windfall gain that a pension fund might make if it has invested in land in the hope of making a development or betterment profit.
Mention has been made of the recent case where a pension fund made a large profit and paid no tax on it. I suggest that that is not a right situation. It is wrong if a pension fund investing for gain does not have to pay tax on the fruit of a windfall gain.
Opposition Members say that pension funds have always been exempt from direct taxation. They have not been exempt in respect of trading profits. If a pension fund buys a property to make a trading profit, it is an adventure in the nature of trade, and there is nothing in our legislation which says that it shall not pay the normal tax rates on that kind of profit.
There is not much difference between a pension fund investing in land in the hope and belief that it will have a large windfall profit and an adventure in the course of trade. The difference is very narrow and limited. I do not see why pension funds should be privileged and get complete exemption from this tax.
Despite the fact that pension funds benefit about half of the total work force, there are other factors to be taken into


consideration. There are the benefits to the community. Many people do not belong to occupational pension funds and will not get the benefit of these windfall gains. We have to balance the one against the other, and we believe that it is fairer in this case that pension funds should bear a full share of the tax on these windfall gains.
The hon. Member for Aylesbury asked about the yield of the tax. He will not be surprised to learn that it is very difficult to estimate the yield of a tax on land. Land is extremely susceptible to economic circumstances, to fluctuations in money and so on. Whatever tax is applied, it is very difficult to arrive at an exact figure. But we have tried, and the best estimate we can make is that after about five years—it will take time for the yield to build up because of the transitional provisions in the legislation and because many builders have bought land at a very high price and will not have to pay development land tax on it—we hope that the yield will be between £200 million and £300 million. I cannot be more exact. It would be unfair to try to pretend that there is an exact estimate. It is the best that we can do in the circumstances. It is considerably higher than the yield of the present tax on the statute book—Lord Barber's proposal in 1973.
The hon. Member for Aylesbury asked about public service manpower. The right hon. Member for Crosby referred in scathing terms to "that palace in Middlesbrough". Between 200 and 300 people will be needed to raise assessments and generally to operate the development land tax. It means that fewer people will be needed to operate the development gains charge. They will be fewer by up to about 100 who will be needed for this purpose. But it will mean an increase in public service manpower of between 200 and 300 to administer this tax.
Before the Opposition start to think that the Government are deliberately increasing public service manpower, I hope they will remember that if they had a special tax, as they want now, apparently that, too, would need an increase in manpower. A special tax with special problems requires special staff to deal with it.
Mention has been made of roll-over relief. The Bill does not contain provisions for roll-over relief. We think that the need for roll-over relief has been met by the lower tranche of 66⅔ per cent. Again, this is a matter which I have no doubt will be discussed in Committee.
My hon. Friend the Member for Meriden (Mr. Tomlinson) raised three matters about the Co-operative Union. First, he pointed out that in Clause 19 industrialists who develop for their own use get the benefit of exemption until they cease to use the property for industrial purposes, whereas this does not apply to non-industrial and commercial development. This is a deliberate distinction between industrial use and other commercial and non-industrial use. It is difficult to draw a line between the two. The distinction is well-known in income tax legislation. For the purposes of capital allowances, for example, a distinction is drawn between industrial and commercial use.
There is a problem here. In many cases a commercial development could be said to be closely related to industrial development. But we think that this is the only way in which we can practically draw the line. The second point concerns the amalgamation of co-operatives. Clause 20 deals with companies, but we shall consider whether it is possible to give the amalgamation of co-operatives the same kind of relief.
The hon. Member for the Isle of Wight (Mr. Ross) made an interesting and sympathetic speech, partly, I suspect, because of his profound knowledge of these matters. We welcome his general support, subject to the two reservations, for our legislation. He raised a number of detailed points on which I should like to write to him. He asked also why we could not allow losses to be set against the tax. At first sight, I admit, it would appear wrong not to do so. However, we are here concerned with a betterment tax, and the concept of a betterment loss does not make much sense. If a betterment value arises from a development because planning permission has been granted, that gives rise to a profit. There is no such thing as betterment loss, because that is a different concept. Nevertheless, I accept that some people would regard it as unfair not to allow losses to be set against the tax.
The hon. Member for Perth and East Perthshire (Mr. Crawford) made an extraordinary speech which seemed to be more Tory than the Tories. He raised the detailed point on the Church of Scotland. I am grateful to him for suggesting that I might write to him in this respect. These are complicated matters, and it would not be fair to anybody if I tried to deal with them now.
I was surprised to hear that Scotland, apparently, does not have speculators who make vast fortunes from the sale of land. I hope that the Scottish people will take note that the hon. Member apparently supports the Tory Party in wanting to allow these people—and there must be some in Scotland with the oil developments there—to retain almost half their development profits. I would have thought that the people of Scotland, like those of England and Wales, would have preferred most of the development gain to accrue to the people and not to private interests.

Mr. Crawford: I repeat what I said to the hon. Member for Fife, Central (Mr. Hamilton). It is not that there are no speculators in Scotland, but that they are fewer.

Mr. Davies: I understand. There are fewer speculators and, therefore, they should be charged only at the rate of 52 per cent.
I come now to the Opposition's amendment. The first point to make is that, ostensibly at least, it seems to indicate the conversion of the Tory Party to the concept of a special tax on windfall gains arising from the granting of planning permission. Perhaps we should be thankful for that. The Tory Party has traditionally looked after the interests of the landowner, but we must look in detail at these matters in the light of the speeches from the Conservative Benches, especially the Opposition Front Bench. We are forced to conclude that Saul is still Saul. He may have sidled surreptitiously along the road to Damascus, but he is still Saul, not Paul, when he gets there. That is the history of the Tory Party on land.
The Tories say that there must be a special tax but that it must not impede the development of land. They alight on the magical figure of 52 per cent. That is the point at which, apparently, there will

be no inhibition upon the supply of land, but why should that be the magical figure? I suggest that the Opposition dare not go any lower than 52 per cent. because public opinion would not wear it, and that they dare not go any higher because their supporters in the shires and in the City would not accept it. They therefore settle for 52 per cent. and cloak it with the respectability of saying that it will not inhibit development.

Mr. Michael Latham: Was it the Labour Party supporters in the shires who fixed the figure of 40 per cent. under the Land Commission Act?

Mr. Davies: I shall deal with that point in a moment. We do not see what sense it makes to charge someone who makes a windfall gain from development land at 52 per cent. when we charge manufacturing industry the same rate on its profits. Why should any one invest in manufacturing industry if the Opposition are prepared to give them the same net-of-tax profit from investing in land, which is easier to do in many ways than investing in manufacturing industry?
It is wrong to discriminate in favour of the land speculator in the way in which the Opposition seem to want to do. We have only to look at the events of the recent past—I do not need to go back to 1947—to demonstrate that their motives are far from honourable when it comes to land taxation.
In 1970 the Conservative Government inherited a special tax on land. What did they do? They abolished it. That tax on land was at the comparatively modest rate of 40 per cent. When they came into office in 1970 and found that 40 per cent. was too high for them, they abolished that special tax, which now apparently they want, as one of their first acts. They reduced the tax on windfall gains from 40 per cent. to 30 per cent. For three years, from 1970 to 1973, the tax on these windfall gains was only 30 per cent. Then, having distorted the tax system heavily in favour of the land speculator and having embarked upon a policy of giving away pound notes—in effect, they inflated the money supply—they engineered the greatest boom in land prices since, if not before, the war.
We know what happened. Large fortunes were made by a few. Plenty of land changed hands, of course, but at


very high prices. Many builders today are regretting that they ever bought it. Hon. Gentlemen have made moving speeches about our great building industry. Most of the problems that it faces today stem from those three years when the Conservative Government inflated the price of land. Builders paid high prices for land and now many of them cannot get rid of it.
What happened in December 1973? The Tories, eventually shamed by the public clamour and indignation, suddenly put the rate of tax up retrospectively from 30 per cent, to 75 per cent, in their panic. During that period they dealt such a severe blow to the credit mechanisms of this country that the Bank of England is still attempting to pick up the pieces. [HON. MEMBERS: "Rubbish."] Hon. Gentlemen shout "Rubbish". They should read in their newspapers this week about a certain property company. The poor old Governor of the Bank of England is still out in his lifeboat looking for survivors. They caused substantial damage not only to the property market but to the whole credit mechanisms of this country. The collapse of the secondary banks occurred because of what they did. We are still trying to pick up the pieces of that costly and ridiculous exercise.

Mr. Peter Rees: Does the hon. Gentleman draw any distinction between the merits of the reclamation of slag heaps and the development of ordinary land? Is one meritorious and the other unmeritorious? If so, will provision be made in the Bill for the reclamation of slag heaps?

Mr. Davies: That is the kind of point I should have expected the hon. and learned Gentleman to make at this time of night. [HON. MEMBERS: "Answer."] I am sorry that the hon. and learned Gentleman did not make a speech, because he has considerable expertise in these matters. No doubt the details of the legislation will be clear to him.
The Conservative Government damaged the credit mechanisms of this country and caused considerable harm to the property market. They have not learned from what happened between 1970 and 1973, because again they are proposing reducing the rate to 52 per cent. They have

not learned that if they distort the fiscal system in favour of such a scarce commodity as land, they end up—as they did—by lining the pockets of the few and doing substantial damage to land supply and the property market. I should have thought that, within their appalling record in this area, Opposition Front Bench speakers would have shown some humility in their speeches and in framing their amendment.
I turn now to the so-called reasoned amendment. It seeks to decline a Second Reading because, it is alleged, in certain circumstances tax liabilities will be imposed before profits accrue. That is a reference to the charge on the commencement of material development. My right hon. Friend the Paymaster-General has dealt with that point. I stress again what is clear from the Bill: that if there is a development value at the commencement of material development, the tax can be paid over eight yearly instalments or 16 half-yearly instalments, and that no tax at all is payable for 12 months from the commencement of material development. Twelve months is a long enough period, in my opinion, because by that time there will be money accruing to the builder to enable him to meet his liability.

Mr. Graham Page: On the point about eight years, surely the schedule says that all the instalments have to be paid before planning permission has expired in five years.

Mr. Davies: I do not think that the right hon. Gentleman is correct. No doubt he will pursue that matter at great length in Committee.
We believe that the charge is reasonable from the point of view of time. This criticism about material development comes rather strangely from those who were responsible for the Barber measures of 1973. Three of those who signed the amendment, including the right hon. Lady the Member for Finchley (Mrs. Thatcher)—one of the many tax experts, apparently—were members of the Cabinet at the time who, no doubt, approved the Barber measures. They approved something called the first letting charge. The first letting charge has been universally condemned throughout the property industry, and it was far more unfair than the measure which we are proposing.

Mr. Sainsbury: Mr. Sainsbury indicated dissent.

Mr. Davies: The hon. Gentleman shakes his head, but I should like to remind him of what was said recently by somebody with intimate knowledge of industrial development—and by "industrial development" I am referring to the building of factories. He said that one of the reasons why builders were not building anything in Britain was the first letting charge. He went on to say that the development land tax, due to take over in August, was far less of an impediment to investment than the previous legislation. That is the view of somebody with experience of industrial development, that the first letting charge is inhibiting factory building.
Opposition Members have equally forgotten that they approved the imposition of a charge of 83 per cent. if a man made a gift of his land to his son. The party opposite was going to charge 83 per cent., although no money would be involved in the transaction. Yet it has the effrontery to put down an amend-

ment condemning the charge on material development.

The Opposition's amendment and their reaction demonstrate not only their lack of a credible policy for land and land taxation but also that politically and philosophically they are incapable of devising a policy for land. We believe that most of the profits which arise through the granting by the community of planning permission should be restored to the community. The Bill fulfils that belief and establishes a comprehensive and equitable system of land taxation, a system which, I believe, will have the overwhelming support of the British people.

I invite the House to give the Bill a Second Reading and to reject the Opposition's rather puny amendment.

Question put, That the amendment be made:—

The House divided: Ayes 258, Noes 292.

Division No. 86].
AYES
[10.0 p.m.


Adley, Robert
Cope, John
Gow, Ian (Eastbourne)


Alison, Michael
Cordle, John H.
Grant, Anthony (Harrow C)


Amery, Rt Hon Julian
Cormack, Patrick
Gray, Hamish


Arnold, Tom
Corrie, John
Grist, Ian


Atkins, Rt Hon H. (Spelthorne)
Costain, A. P.
Grylls, Michael


Awdry, Daniel
Crawford, Douglas
Hall, Sir John


Baker, Kenneth
Critchley, Julian
Hall-Davis, A. G. F.


Banks, Robert
Crowder, F. P.
Hamilton, Michael (Salisbury)


Bell, Ronald
Davies, Rt Hon J. (Knutsford)
Hampson, Dr Keith


Bennett, Dr Reginald (Fareham)
Dean, Paul (N Somerset)
Hannam, John


Benyon, W.
Dodsworth, Geoffrey
Harrison, Col Sir Harwood (Eye)


Berry, Hon Anthony
Drayson, Burnaby
Harvie Anderson, Rt Hon Miss


Biffen, John
du Cann, Rt Hon Edward
Hastings, Stephen


Biggs-Davison, John
Dunlop, John
Havers, Sir Michael


Blaker, Peter
Durant, Tony
Hayhoe, Barney


Body, Richard
Dykes, Hugh
Heath, Rt Hon Edward


Boscawen, Hon Robert
Eden, Rt Hon Sir John
Heseltine, Michael


Bottomley, Peter
Edwards, Nicholas (Pembroke)
Hicks, Robert


Bowden, A. (Brighton, Kemptown)
Elliott, Sir William
Higgins, Terence L.


Boyson, Dr Rhodes (Brent)
Emery, Peter
Holland, Philip


Bradford, Rev Robert
Eyre, Reginald
Hordern, Peter


Braine, Sir Bernard
Fairbairn, Nicholas
Howe, Rt Hon Sir Geoffrey


Brittan, Leon
Fairgrieve, Russell
Hunt, John


Brocklebank-Fowler, C.
Fell, Anthony
Hurd, Douglas


Brotherton, Michael
Finsberg, Geoffrey
Hutchison, Michael Clark


Brown, Sir Edward (Bath)
Fisher, Sir Nigel
Irving, Charles (Cheltenham)


Bryan, Sir Paul
Fletcher, Alex (Edinburgh N)
James, David


Buchanan-Smith, Alick
Fletcher-Cooke, Charles
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)


Buck, Antony
Fowler, Norman (Sutton C'f'd)
Jessel, Toby


Budgen, Nick
Fox, Marcus
Johnson Smith, G. (E Grinstead)


Bulmer, Esmond
Fraser, Rt Hon H. (Stafford & St)
Jones, Arthur (Daventry)


Burden, F. A.
Fry, Peter
Jopling, Michael


Butler, Adam (Bosworth)
Galbraith, Hon T. G. D.
Joseph, Rt Hon Sir Keith


Carlisle, Mark
Gardiner, George (Reigate)
Kaberry, Sir Donald


Carson, John
Gardner, Edward (S Fylde)
Kellett-Bowman, Mrs Elaine


Chalker, Mrs Lynda
Gilmour, Rt Hon Ian (Chesham)
Kershaw, Anthony


Churchill, W. S.
Gilmour, Sir John (East Fife)
Kimball, Marcus


Clark, Alan (Plymouth, Sutton)
Glyn, Dr Alan
King, Evelyn (South Dorset)


Clark, William (Croydon S)
Godber, Rt Hon Joseph
King, Tom (Bridgwater)


Clarke, Kenneth (Rushcliffe)
Goodhart, Philip
Knox, David


Clegg, Walter
Goodhew, Victor
Lamont, Norman


Cockcroft, John
Goodlad, Alastair
Lane, David


Cooke, Robert (Bristol W)
Gorst, John
Latham, Michael (Melton)




Lawrence, Ivan
Oppenheim, Mrs Sally
Spicer, Jim (W Dorset)


Lawson, Nigel
Page, Rt Hon R. Graham (Crosby)
Spicer, Michael (S Worcester)


Lester, Jim (Beeston)
Parkinson, Cecil
Sproat, lain


Lewis, Kenneth (Rutland)
Pattie, Geoffrey
Stainton, Keith


Lloyd, Ian
Percival, Ian
Stanbrook, Ivor


Luce, Richard
Peyton, Rt Hon John
Stanley, John


McAdden, Sir Stephen
Powell, Rt Hon J. Enoch
Steen, Anthony (Wavertree)


MacCormick, lain
Price, David (Eastleigh)
Stewart, Donald (Western Isles)


McCrindle, Robert
Prior, Rt Hon James
Stewart, Ian (Hitchin)


McCusker, H.
Pym, Rt Hon Francis
Stokes, John


Macfarlane, Neil
Raison, Timothy
Stradling Thomas, J.


MacGregor, John
Rathbone, Tim
Tapsell, Peter


Macmillan, Rt Hon M. (Farnham)
Rawlinson, Rt Hon Sir Peter
Taylor, R. (Croydon NW)


McNair-Wilson, M. (Newbury)
Rees, Peter (Dover & Deal)
Taylor, Teddy (Cathcart)


McNair-Wilson, P. (New Forest)
Rees-Davies, W. R.
Tebbit, Norman


Madel, David
Renton, Rt Hon Sir D. (Hunts)
Temple-Morris, Peter


Marshall, Michael (Arundel)
Renton, Tim (Mid-Sussex)
Thatcher, Rt Hon Margaret


Marten, Neil
Rhys Williams, Sir Brandon
Thomas, Rt Hon P. (Hendon S)


Maude, Angus
Ridley, Hon Nicholas
Thompson, George


Maudling, Rt Hon Reginald
Ridsdale, Julian
Townsend, Cyril D.


Mawby, Ray
Rifkind, Malcolm
Trotter, Neville


Maxwell-Hyslop, Robin
Rippon, Rt Hon Geoffrey
Tugendhat, Christopher


Mayhew, Patrick
Roberts, Michael (Cardiff NW)
van Straubenzee, W. R.


Meyer, Sir Anthony
Roberts, Wyn (Conway)
Vaughan, Dr Gerard


Miller, Hal (Bromsgrove)
Rodgers, Sir John (Sevenoaks)
Viggers, Peter


Mills, Peter
Ross, William (Londonderry)
Wakeham, John


Miscampbell, Norman
Rossi, Hugh (Hornsey)
Walder, David (Clitheroe)


Mitchell, David (Basingstoke)
Rost, Peter (SE Derbyshire)
Walker, Rt Hon P. (Worcester)


Molyneaux, James
Royle, Sir Anthony
Walker-Smith, Rt Hon Sir Derek


Monro, Hector
Sainsbury, Tim
Wall, Patrick


Montgomery Fergus
St. John-Stevas, Norman
Walters, Dennis


Moore, John (Croydon C)
Scott, Nicholas
Weatherill, Bernard


More, Jasper (Ludlow)
Scott-Hopkins, James
Wells, John


Morgan, Geraint
Shaw, Giles (Pudsey)
Welsh, Andrew


Morris, Michael (Northampton S)
Shaw, Michael (Scarborough)
Whitelaw, Rt Hon William


Morrison, Charles (Devizes)
Shelton, William (Streatham)
Wiggin, Jerry


Morrison, Hon Peter (Chester)
Shepherd, Colin
Winterton, Nicholas


Mudd, David
Shersby, Michael
Wood, Rt Hon Richard


Neave Airey
Silvester, Fred
Young, Sir G. (Ealing, Acton)


Nelson, Anthony
Sims, Roger
Younger, Hon George



Sinclair, Sir George



Neubert, Michael
Skeet, T. H. H.
TELLERS FOR THE AYES:


Newton, Tony
Smith, Dudley (Warwick)
Mr. Spencer Le Marchant and


Nott, Jhon
Speed, Keith
Mr. Carol Mather.


Onslow, Cranley
Spence, John





NOES


Abse, Leo
Cant, R. B.
Edge, Geoff


Allaun, Frank
Carmichael, Neil
Edwards, Robert (Wolv SE)


Anderson, Donald
Carter, Ray
Ellis, John (Brigg & Scun)


Archer, Peter
Carter-Jones, Lewis
English, Michael


Armstrong, Ernest
Cartwright, John
Ennals, David


Ashley, Jack
Castle, Rt Hon Barbara
Evans, Fred (Caerphilly)


Ashton, Joe
Clemitson, Ivor
Evans, loan (Abordare)


Atkins, Ronald (Preston N)
Cocks, Michael (Bristol S)
Evans, John (Newton)


Atkinson, Norman
Cohen, Stanley
Ewing, Harry (Stirling)


Bagier, Gordon A. T.
Concannon, J. D.
Fernyhough, Rt Hon E.


Barnett, Guy (Greenwich)
Conlan, Bernard
Flannery, Martin


Barnett, Rt Hon Joel (Heywood)
Cook, Robin F. (Edin C)
Fletcher, Ted (Darlington)


Bates, Alf
Corbett, Robin
Foot, Rt Hon Michael


Bean, R. E.
Cox, Thomas (Tooting)
Ford, Ben


Beith, A. J.
Craigen, J. M. (Maryhill)
Forrester, John


Benn, Rt Hon Anthony Wedgwood
Crawshaw, Richard
Fowler, Gerald (The Wrekin)


Bennett, Andrew (Stockport N)
Cronin, John
Fraser, John (Lambeth, N'w'd)


Bidwell, Sydney
Crosland, Rt Hon Anthony
Freeson, Reginald


Bishop, E. S.
Cryer, Bob
Freud, Clement


Blenkinsop, Arthur
Cunningham, Dr J. (Whiteh)
Garrett, John (Norwich S)


Boardman, H.
Davidson, Arthur
Garrett, W. E. (Wallsend)


Booth, Rt Hon Albert
Davies, Bryan (Enfield N)
George, Bruce


Boothroyd, Miss Betty
Davies, Denzil (Llanelli)
Gilbert, Dr John


Bottomley, Rt Hon Arthur
Davis, Clinton (Hackney C)
Ginsburg, David


Boyden, James (Bish Auck)
Deakins, Eric
Golding, John


Bradley, Tom
Dean, Joseph (Leeds West)
Gould, Bryan


Bray, Dr Jeremy
de Freitas, Rt Hon Sir Geoffrey
Gourlay, Harry


Brown, Hugh D. (Provan)
Delargy, Hugh
Graham, Ted


Brown, Robert C. (Newcastle W)
Dell, Rt Hon Edmund
Grant, George (Morpeth)


Brown, Ronald (Hackney S)
Dempsey, James
Grant, John (Islington C)


Buchan, Norman
Dormand, J. D.
Grocott, Bruce


Buchanan, Richard
Douglas-Mann, Bruce
Hamilton, James (Bothwell)


Butler, Mrs Joyce (Wood Green)
Duffy, A. E. P.
Hamilton, W. W. (Central Fife)


Callaghan, Rt Hon J. (Cardiff SE)
Dunn, James A.
Harrison, Walter (Wakefield)


Callaghan, Jim (Middleton & P)
Dunnett, Jack
Hart, Rt Hon Judith


Campbell, Ian
Dunwoody, Mrs Gwyneth
Hattersley, Rt Hon Roy


Canavan, Dennis
Eadie, Alex
Hayman, Mrs Helene




Healey, Rt Hon Denis
Marquand, David
Silkin, Rt Hon John (Deptford)


Heffer, Eric S.
Marshall, Dr Edmund (Goole)
Silkin, Rt Hon S. C. (Dulwich)


Hooley, Frank
Marshall, Jim (Leicester S)
Sillars, James


Horam, John
Mason, Rt Hon Roy
Silverman, Julius


Howell, Rt Hon Denis
Maynard, Miss Joan
Skinner, Dennis


Howells, Gerainl (Cardigan)
Meacher, Michael
Small, William


Hoyle, Doug (Nelson)
Mellish, Rt Hon Robert
Smith, John (N Lanarkshire)


Huckfield, Les
Mendelson, John
Snape, Peter


Hughes, Rt Hon C. (Anglesey)
Mikardo, Ian
Spearing, Nigel


Hughes, Mark (Durham)
Millan, Bruce
Spriggs, Leslie


Hughes, Robert (Aberdeen N)
Miller, Dr M. S. (E Kilbride)
Stallard, A. W.


Hughes, Roy (Newport)
Miller, Mrs Millie (llford N)
Steel, David (Roxburgh)


Hunter, Adam
Molloy, William
Stewart, Rt Hon M. (Fulham)


Irvine, Rt Hon Sir A. (Edge Hill)
Moonman, Eric
Stoddart, David


Irving, Rt Hon S. (Dartford)
Morris, Alfred (Wythenshawe)
Stonehouse, Rt Hon John


Jackson, Miss Margaret (Lincoln)
Morris, Charles R. (Openshaw)
Stott, Roger


Janner, Greville
Mulley, Rt Hon Frederick
Strang, Gavin


Jay, Rt Hon Douglas
Murray, Rt Hon Ronald King
Strauss, Rt Hon G. R.


Jeger, Mrs Lena
Newens, Stanley
Summerskill, Hon Dr Shirley


Jenkins, Hugh (Putney)
Oakes, Gordon
Swain, Thomas


Jenkins, Rt Hon Roy (Stechford)
Ogden, Eric
Taylor, Mrs Ann (Bolton W)


John, Brynmor
O'Halloran, Michael
Thomas, Jeffrey (Abertillery)


Johnson, James (Hull West)
O'Malley, Rt Hon Brian
Thomas, Ron (Bristol NW)


Johnson, Walter (Derby S)
Orme, Rt Hon Stanley
Thorne, Stan (Preston South)


Johnston, Russell (Inverness)
Ovenden, John
Tierney, Sydney


Jones, Alec (Rhondda)
Owen, Dr David
Tinn, James


Jones, Barry (East Flint)
Padley, Walter
Tomlinson, John


Jones, Dan (Burnley)
Palmer, Arthur
Torney, Tom


Judd, Frank
Park, George
Tuck, Raphael


Kaufman, Gerald
Parker, John
Urwin, T. W.


Kelley, Richard
Parry, Robert
Varley, Rt Hon Eric G.


Kerr, Russell
Pavitt, Laurie
Wainwright, Edwin (Dearne V)


Kilroy-Silk, Robert
Peart, Rt Hon Fred
Walker, Harold (Doncaster)


Kinnock, Neil
Pendry, Tom
Walker, Terry (Kingswood)


Lambie, David
Perry, Ernest
Ward, Michael


Lamborn, Harry
Phipps, Dr Colin
Watkins, David


Lamond, James
Prescott, John
Weetch, Ken


Latham, Arthur (Paddington)
Price, C. (Lewisham W)
Weitzman, David


Leadbitter, Ted
Price, William (Rugby)
Wellbeloved, James


Lee, John
Radice, Giles
White, Frank R. (Bury)


Lestor, Miss Joan (Eton & Slough)
Richardson, Miss Jo
White, James (Pollok)


Lever, Rt Hon Harold
Roberts, Albert (Normanton)
Whitehead, Phillip


Lewis, Ron (Carlisle)
Roberts, Gwilym (Cannock)
Whitlock, William


Lipton, Marcus
Robertson, John (Paisley)
Wigley, Datydd


Litterick, Tom
Robinson, Geoffrey
Willey, Rt Hon Frederick


Loyden, Eddie
Roderick, Caerwyn
Williams, Alan (Swansea W)


Luard, Evan
Rodgers, George (Chorley)
Williams, Alan Lee (Hornch'ch)


Lyon, Alexander (York)
Rodgers, William (Stockton)
Williams, Rt Hon Shirley (Hertford)


Lyons, Edward (Bradford W)
Rooker, J. W.
Williams, Sir Thomas


McCartney, Hugh
Roper, John
Wilson, Alexander (Hamilton)


McElhone, Frank
Rose, Paul B.
Wilson, Rt Hon H. (Huyton)


MacFarquhar, Roderick
Ross, Stephen (Isle of Wight)
Wilson, William (Coventry SE)


McGuire, Michael (Ince)
Ross, Rt Hon W. (Kilmarnock)
Wise, Mrs Audrey


Mackenzie, Gregor
Rowlands, Ted
Woodall, Alec


Mackintosh, John P.
Sandelson, Neville
Woof, Robert


Maclennan, Robert
Sedgemore, Brian
Wrigglesworth, Ian


McMillan, Tom (Glasgow C)
Selby, Harry
Young, David (Bolton E)


McNamara, Kevin
Shaw, Arnold (llford South)



Madden, Max
Sheldon, Robert (Ashton-u-Lyne)
TELLERS FOR THE NOES:


Magee, Bryan
Shore, Rt Hon Peter
Mr. Joseph Harper and


Mallalieu, J. P. W.
Short, Rt Hon E. (Newcastle C)
Mr. Donald Coleman.


Marks, Kenneth
Short, Mrs Renée (Wolv NE)

Question accordingly negatived.

Main Question put forthwith pursuant to Standing Order No. 39 (Amendment on Second or Third Reading), and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

LOCAL LOANS (INCREASE OF LIMIT)

Motion made, and Question proposed,

That the Local Loans (Increase of Limit) Order 1976, a draft of which was laid before this House on 18th February, be approved.—[Mr. Denzil Davies].

10.15 p.m.

Mr. Ian Gow: The Order seeks to increase by £2,000 million the amount loaned under Section 55 of the Finance Act 1975. That Act received the Royal Assent as recently as 13th March last year. A year and two days later, the Government ask the House, at quarter-past 10 at night, to agree that the provision of £2,000 million in Section 55 is not enough and say that a further £2,000 million is required. It would not be right for the House to allow the Government's proposal to pass on the nod without the presentation of the argument against it.
The argument against the Order is that it allows the Government to proceed on their profligate path and it is not only in order for but the duty of the Opposition to point out to the Minister and to the country the consequences of increasing the amount of the limit on borrowing by as much as £2,000 million. The Order is an indication of profligate spending path on which the Government have embarked, and the House should oppose it.

10.17 p.m.

Mr. Geoffrey Dodsworth: I am grateful to my hon. Friend the Member for Eastbourne (Mr. Gow) for drawing attention to the proposed increase in the Government's right to borrow money.
In January 1975 we debated the subject of the original authority for the Order, namely, the Finance Bill which became the Finance Act 1975. The authority was provided in Section 55 and we asked the then Financial Secretary for a number of assurances on matters contained in that section. In particular, we asked for an assurance that there would be proper control and monitoring of public expenditure, and the Financial Secretary said:
It is right that from the beginning I should make it clear, as both hon. Gentlemen recog-

nise, that this increase in the tranche and the increase in the ability of the Public Works Loan Board to raise money in no way derogates from parliamentary control over funds voted to local authorities, nor does it in any way imply any diminution in the present Government's intention to restrict the rate of local authority expenditure in real terms."—[Official Report, 22nd January 1975; Vol. 884, c. 1672].
That would be a heart-warming reassurance. But we are entitled to ask what progress has been made by Ministers in that task of controlling expenditure.
I have some doubts whether they have been successful. At the time this matter was discussed I was trying to obtain information about the levels of expenditure contained in various documents and reports. I was particularly concerned about the accounts of the Public Works Loan Board, which, under the 1968 Act, is required to lodge its accounts with the House.
Earlier this year I tabled a Question to the Chief Secretary to the Treasury asking him why he had abandoned certain information and, in particular, why he had ceased publication of the document "Public Loans from the National Loans Fund". I asked him whether he would resume publication and whether he had had any representations. He replied:
I do not believe there is adequate justification for resuming publication of the White Paper "Public Loans from the National Loans Fund.""—[Official Report, 20th January 1976; Vol. 903, c. 442].
He went on to say that a Written Answer on 10th April 1975 made it clear that the Treasury was to discontinue publication of that document. He said that there had been no representations other than from myself and my hon. Friend the Member for Bedford (Mr. Skeet).
I took the understandable liberty of looking at that answer in April 1975. I found that it said that there was plenty of other information available. That is a familiar cry from the Treasury—"Don't worry too much. It's all in good hands. We have expenditure under control. If you use your head you will be able to get the information you want."
The answer in April said:
Other information referring mainly to earlier years is available in the annual Accounts relating to Issues from the National Loans Fund."—[Official Report, 10th April 1975; Vol. 889, c. 474].


The point is that there is a quite clear reference to accounts relating to issues from the National Loans Fund. That is a strange thing. Last year I sought to obtain that document when it was laid before the House. I have here a copy of what appears to be the front sheet, dated February 1975. When I asked to see the original document I was told that it was not available. I thought that that was rather surprising, because I understood from the Order Paper that this matter had been laid before the House. I was told "Ah! It is a normal procedure. You don't really understand. It is a dummy." I was a trifle surprised but, being a new Member, understood that I had to be instructed in these matters. I caused inquiries to be made. I found that that document was not laid before the House until 10th March—five or six weeks later.
That would not be so bad, except that the explanation I received by letter was quite interesting. It was that when papers have, by Act, to be laid by a certain date and this cannot be done for practical reasons—usually printing reasons—a dummy is laid. In the case of a paper about accounts, it was said that it was sometimes impossible to bring it up to date in time for it to be printed by the due date. What an interesting explanation—"We cannot get it done in time."
It is said that when a Minister wants to hold a Press conference, which he cannot do before the paper is technically laid, a dummy is usually available in a few hours. In this case it was a few weeks. It was also said that that procedure was used—understandably—when a recess occurred and the paper had to be laid while the House was not sitting. Here we have a document that was supposed to be available to the House for its consideration of the activities of Government and the expenditure of funds which we are being asked to vote tonight, but it is not available this year, because that document apparently has ceased to exist. I checked in the Library this evening and discovered that it is no longer available. Yet the Chief Secretary to the Treasury said that it was a source of information we were entitled to use. All this appears not to imply the accurate control over public expenditure that we can and should expect.
It might be helpful if we were to have answers to a number of questions on the operation of Section 55 of the Finance Act 1975. In regard to the present Order, we would like to know what proportion of these funds is to be used to re-finance mature debt. Last year, apparently, the Financial Secretary experienced some difficulty in supplying that information. I hope that it will be available this evening.
May we be told how much of these funds are to be used for new loan advances? May we have an estimate of the figure for 1975–76? What is that figure likely to be? We know that the estimate for 1974–75 was £1,625 million. Has that figure increased? The speed at which we are being asked to approve another £2,000 million suggests that this expenditure has a momentum of its own. We are concerned to control expenditure before the event. It is not good enough to sweep up expenditure afterwards and then to say "Because we are getting close to the limit, we shall have to increase the limit." I hope that we shall receive a clear assurance that Ministers have laid down specific criteria for expenditure before it takes place. There is no evidence that we have such control.
Some alarming information comes to light from the White Paper on Public Expenditure. I wish to draw attention to Note (2) on page 156, in regard to the section on capital expenditure. That note says:
Capital expenditure on key sector services is subject to specific Departmental approval. Local authorities are however free to set their own priorities within the local determined sector as a whole and for this reason the pattern of spending described in this part of the table can be no more than a guide.
Here we have a document that is the cause of a great deal of controversy. In other words, the document says "One cannot believe the figures, because they are nothing more than a guide." They are an interesting comment on capital expenditure in local government, because it ran at a rate of £2,265 million in 1975–76, it reduced to £2,184 million in 1976–77, and continued at that kind of level until 1978–79. That looks to me like expenditure well in excess of the amount likely to be available for the re-financing of mature debt and for new advances. In these circumstances we


must ask for some better assurances from Treasury Ministers that they are able to control and monitor levels of Government expenditure, and particularly local government expenditure.

Mr. John Nott: Because this is the first occasion on which an Order allowing £2,000 million extra public expenditure has come before the House, and since it has not been formally introduced by a Minister, would the Minister like to speak now? I understand that, in error, this matter was sought to be put through "on the nod". Perhaps the Minister would now like to explain this very large piece of expenditure.

10.29 p.m.

The Minister of State, Treasury (Mr. Denzil Davies): If it pleases the House, I shall be happy to speak now, and certainly if it makes things easier for the hon. Member for St. Ives (Mr. Nott).
I apologise for what happened at the start of the debate. I moved the Order formally, but as this is an affirmative resolution, I should have spoken first.
The Order increases by £2,000 million the amount available to the Public Works Loan Commissioners for lending to local authorities and other eligible authorities. The amount was originally fixed at £2,000 million in the Finance Act 1975, and the same Act gave the Treasury power to increase the amount by £2,000 million at a time on three further occasions. This power is exercised by Order, subject to affirmative resolution of the House of Commons. This is the first such Order under the Act.
As of today, the Public Works Loan Commissioners had about £335 million available for lending. This will be fully adequate to meet applications for loans within the formula governing local authorities' entitlement to borrow from the Commissioners until the end of March. From 1st April, however, local authorities will be able to borrow under their 1976–77 formula entitlement and it is essential, therefore, to provide the Commissioners with further lending powers to meet the demands that will be made upon them from April onwards.
The House is, therefore, asked to approve this Order so that the flow of

essential capital funds may be maintained. I emphasise that the Order does not in itself sanction any increase in local authorities' capital spending. Capital expenditure by local authorities is controlled by the Government in other ways. Nor does the extent to which, within approved limits, local authorities borrow from the Commissioners, or in the market in their own name, affect the size of the public sector borrowing requirement.
The Order is a mechanism to allow local authorities to borrow up to their entitlement from the Public Works Loans Board, if they so wish. It does not affect public expenditure. The purpose of the Order is simply to ensure that the Commissioners have available the funds necessary to meet the demands by local authorities upon them. In 1976–77, local authorities will be entitled to borrow from the Commissioners 30 per cent. of their net capital expenditure—or 40 per cent. in the less prosperous areas—plus 3⅓ per cent. of their outstanding capital debt—or 4 per cent. in the less prosperous areas—for re-financing loans which may fall due. This formula, which is the same as that in operation in the current year, is intended to benefit both those authorities with substantial capital expenditure programmes and those with a significant requirement for financing maturing debt.
We are concerned not with public expenditure but merely with a mechanism by which local authorities borrow to meet their individual requirements, whether in the market or from the Board. The Order authorises, for a further year, borrowings of up to £2,000 million from the Board.

Mr. Gow: Is it not much easier for local authorities to borrow money from the Commissioners than in the market, and will this Statutory Instrument not increase the temptation of local authorities to borrow at cheaper rates from the Government than they would be able to do in the market?

Mr. Davies: Yes—local authorities borrow at cheaper rates from the Public Works Loan Board. There is nothing new in that. It happened under previous Administration and it happens under this Administration. They can borrow up to 30 per cent. or 40 per cent. of their expenditure. Some local authorities


prefer to go to the market, where they have to pay a bit more. If the hon. Gentleman is concerned about the public sector borrowing requirement, he will think twice before forcing local authorities into the market, where they have to pay more for their money. At the end of the day someone has to meet the extra cost of borrowing in the market—either the ratepayer or the taxpayer—so it is not as simple as the hon. Gentleman implies.
Perhaps I may cite an authority—that of the hon. Member for St. Ives. When he was a distinguished Minister of State at the Treasury, in introducing a similar Order in the House he said:
This does not imply in any way, however, that local authority capital spending generally will increase by more than is set out in the Government's programme… The Government spending programmes are contained in the White Paper on Government Expenditure in the PESC review,".—[Official Report, Standing Committee on Statutory Instruments, 18th July 1973; c. 6].

Mr. Norman Tebbit: For how long is this tranche of money expected to last?

Mr. Davies: It is hoped that the tranche of money will last for another year. I was asked how much would be borrowed this year, until 1st April. The sum is almost £1,500 million. Next year it is expected that about £35 million more will be borrowed. The levels are almost the same. When the £2,000 million runs out the Government will have to ask the House for a further tranche under the same procedure to enable the local authorities to borrow from the Public Works Loan Board.

Mr. Gow: Is the Minister saying that the Government's interpretation of Section 55 is that they can make application to the House on three separate occasions, for a total sum of £6,000 million? If that is the Minister's interpretation, I find myself in respectful disagreement with him. The limit imposed by the Government under that section is the additional sum over and above that which appears in the Act, of £2,000 million only.

Mr. Davies: I am sorry if the hon. Gentleman disagrees. I would not like to cross swords with him on the wording, but my understanding is that there was a total amount of £8,000 million, of which

£2,000 was given under the legislation, and we are entitled to three further tranches of £2,000 million, but on each occasion we have to ask the House for it, by way of affirmative resolution. That is my understanding. I hope that the hon. Gentleman will agree that that is the correct interpretation.
I am sure that the House will join me in expressing thanks to the Public Works Loan Commissioners for the services which they continue to render to local authorities with great skill, on a completely voluntary basis.
I hope that I have made clear the purpose of the Order and that the House will approve it.

10.38 p.m.

Mr. John Nott: The debate does not seem to be going with quite the verve that one would expect for an affirmative resolution under which the House agrees to further expenditure of £2,000 million. It is a not insignificant sum, even in these days.
It will be interesting to learn, when the Chancellor of the Exchequer makes his Budget Statement, how far the predictions he made last year have been falsified by events. Looking through the Chancellor's estimates of public spending and the out-turn that we can assume will arise in the current year, it is clear that the overall discrepancy in public spending generally is likely to exceed more than £2,000 million. No doubt my hon. Friend the Member for Blaby (Mr. Lawson) will correct me if I am wrong. I am referring to the difference between last year's White Paper and this year's White Paper.

Mr. Nigel Lawson: An even more striking fact should be borne in mind. In his last Budget Statement the Chancellor said that the borrowing requirement in 1976–77 would be £3 billion less than the £10 billion which he said it would have been in the current year had he not taken action. In other words, he said that the borrowing requirement would be £7 billion in the coming year. We now know that it will be about £11 billion. That is a discrepancy of £4 billion.

Mr. Nott: That confirms my own understanding of the position. The discrepancies are very great. I argue that


the margin of error in local authority capital spending is not going to be so enormous as the kind of margin of error that we have had in other public expenditure generally, because the loan sanction procedure and the cost controls for local authority capital spending should provide a relatively close sanction.
The hon. Gentleman skated rather quickly over this matter, bearing in mind that we are operating in an entirely new environment in local authority expenditure. I glanced at the Chancellor's now famous series of inaccurate predictions of the future when he introduced his Budget on 15th April. He dealt at considerable length with the new regime that he was introducing for local government. It is useful to the Minister of State that he has studied my past remarks—I am sure I made an admirable speech on the occasion he referred to—but we heard the Chancellor boast last week of the dramatic changes he has made in local government control.
The subject of an additional £2,000 million of local government expenditure deserves a little more attention than it has had so far. Although this Order does not itself sanction an increase in spending, it provides the framework within which expenditure takes place. The relevant provision in the Finance Bill 1975 was debated—it was in the early hours of the morning—only because my hon. Friend the Member for Hertfordshire, South-West (Mr. Dodsworth) had tabled an amendment. We were talking then of thousands of millions of pounds. I thank my hon. Friend the Member for Hertfordshire, South-West and my hon. Friend the Member for Eastbourne (Mr. Gow) for drawing attention again to the matter tonight.
As I have said, we are operating in a new environment and we should like to know more about it. Is it not the case that there can be considerable leakage from capital raising into revenue expenditure by local government? I recall making the remark that the Minster of State referred to when I myself introduced a local loans Order. We all learn as the years go by. I have had the benefit of thinking more deeply about my speech on that occasion.

Mr. Roy Carter: We have heard no evidence of it tonight.

Mr. Nott: My further thought leads me to wonder whether the local authorities do not in some cases raise money in the capital market and then use it for revenue expenditure.

Mr. Denzil Davies: No.

Mr. Nott: The hon. Gentleman says "No", but I have an interesting document here—a memorandum of evidence submitted by Mr. Noel Hepworth, Treasurer of the London Borough of Croydon and one of the best-known treasurers in local government. It is entitled
The Significance of Central-Local Government Relationships in the Financing of Local Government".
It was, I believe, his personal evidence to the Layfield Committee. I quote from one paragraph about the control of capital spending:
The capital controls can be avoided by switching capital expenditure to revenue by one means or another, although the cost controls over capital spending are rather more effective in limiting expenditure".
The Minister of State gave a firm assurance that the Order did not affect the level of spending; he said that it provided purely the overall amounts within which loan sanctions operated. But according to the Treasurer of Croydon there can be a considerable amount of leakage from capital into revenue.

Mr. Carter: Why?

Mr. Nott: I do not know why. I am asking the Minister how this arises.
The other point, which is much more relevant now than it was when we had the last increase Order, is that there has been—I am sure that the Minister will agree with this—an inadequate recognition in local government of the impact of capital expenditure on the revenue accounts of local authorities. Only recently has it become clear to councillors and officers in local government that if they borrow money to build a welfare home, for example, it is not just the impact of interest on that borrowed money which affects the ratepayers for successive years but the fact that that home must be staffed and heated and other services provided for.
The forecasts of local authority capital spending over the next quinquennium are fully set out in the public expenditure White Paper, in which there are several tables analysing local government expenditure, but the relationship between the forecast revenue expenditure of local government and the forecast capital expenditure is difficult to understand. When I was winding up for the Opposition in the debate on the public expenditure White Paper on Wednesday——

Mr. Lawson: A first-class speech.

Mr. Nott: I am much too modest to believe that. I said that that morning the Secretary of State for Wales had announced in the Welsh Grand Committee that the housing allocation for Welsh housing alone was running at between £20 million and £30 million more than the estimated figure in the White Paper. [Interruption]. The hon. Gentleman is glad that it is running higher than the figure in the White Paper?

Mr. James Lamond: I said that, unfortunately, I heard the hon. Gentleman's speech.

Mr. Nott: I am glad. I shall not make it again.
In the public expenditure White Paper, Table 3.4, which is a
Special analysis of local authority expenditure in Wales: 1970–71 to 1979–80",
capital expenditure on housing in Wales is predicted for 1975–76 at £92 million, in 1976–77 at £80 million, and in 1977–78 at £68 million. Last week the Secretary of State for Wales suggested that it is running at about £30 million more than is suggested in the White Paper. In other words, within about a month of the publication of the White Paper, the estimates are approaching 50 per cent. above what they were when it was published. It is a remarkable increase.
All this is taking place within the overall figure which the Minister of State has mentioned, but the new regime of cash limits—and we shall have a White Paper on them at the time of the Budget—is relevant to this debate.
I have another question for the Minister, and it is the one put to him by my hon. Friend the Member for Hertfordshire, South-West. Can

the hon. Gentleman give us a little information about maturing debt? How does he see the debt of local government maturing over the next few years? This is very important, because we are trying to analyse how the Chancellor of the Exchequer arrived at his estimate for debt interest. In the public expenditure White Paper, there is a fascinating table which Government supporters have no doubt studied with the care that we have. It sets out the forecast debt interest of local government in 1976–77 as being £1,400 million. May we have some indication how the estimate of £7·5 billion for debt interest in 1979–80, contained in the White Paper, is made up? What proportion of that is represented, at the end of the quinquennium in 1979–80, by local government debt interest? The figures must exist, otherwise there would be no way of arriving at the estimate of £7·5 billion which we have had for the period as a whole. It would be interesting to know how much of that £7·5 billion is relevant to local government expenditure.
In page 15 of the Financial Statement and Budget Report for last year there was a very interesting statement, breaking down public sector financial surplus and borrowing. We shall have another of these Red Books very shortly. There was an estimate there that, in the current year, local authorities would borrow from outside the United Kingdom only about £300 million, against £1,600 million for last year. Is it still the case that the figure of about £300 million is likely to be correct? I do not ask for a precise figure, but are local authorities finding most of their requirements on the domestic market and from the PWLB?
I am sorry to pose these questions to the Minister. It would have been much better if he had spoken at the beginning of the debate, but I understand fully why he did not. As I said, according to the Chancellor of the Exchequer, we are operating an entirely new regime, and I do not think that the hon. Gentleman's speech recognised this. Perhaps we may have a little more information about maturing debt. My hon. Friends have asked one or two questions. We are dealing with £2,000 million and, despite the fact that Government supporters, understandably, are eager to bring this debate to a close, I am sure that it is


right to examine this Order with some care.

10.53 p.m.

Mr. Norman Tebbit: I wonder whether the hon. Gentleman can say whether the estimate that he gave me just now for local authority capital expenditure for the next financial year, as a result of this increase in loans, included the extra Welsh housing expenditure to which my hon. Friend the Member for St. Ives (Mr. Nott) referred.
It may be, of course, that the figure that the Minister dealt with was one of the out-dated White Paper figures from last week—that is, if the White Paper is still valid tonight. I am not sure whether this is one of the days on which it is in effect, or one of those on which it has been suspended.
Was the £30 million included in the estimate that the hon. Gentleman gave me, or is he working on the old White Paper figures?

10.54 p.m.

Mr. Peter Rees: I hesitate to intervene in this rather esoteric debate, but my hon. Friends have uncovered some disturbing points of principle which need airing.
Of course, we are all aware that the party is over. We have had that on the best authority—the Secretary of State for the Environment. What he did not tell us was that the IOUs that finance the party are likely to come fluttering in for many years more. It must be our responsibility, as ultimate custodians of the public purse, to scrutinise closely all those IOUs as they are presented. I do not envy the Minister of State in his task of persuading us that they are valid IOUs, which have committed us to justifiable expenditure.
I do not want to offend the quivering sensibilities of the Marxists and blackmailers on the Government side below the Gangway—to use the language of the Chancellor of the Exchequer rather than my own. I am sure that if I were rash enough to use such phraseology you would call me to order, Mr. Deputy Speaker, so I rely on the precedent created by the right hon. Gentleman. I do not want to wound the sensibilities

of hon. Members below the Gangway and go back over ground covered in two days last week. It is right, however, that we should try to relate the subject matter of the Order to the White Paper "Public Expenditure to 1979–80".
I am naive in these matters, but I should like to discover how these loans are reflected in the White Paper. It is a matter of curiosity that the previous White Paper "Public Expenditure to 1978–79" has a table 3.9, headed, portentously:
Local Authority Expenditure in England and Wales: 1969–70 to 1978–79.
It sets out in detail the anticipated and past current and capital expenditure of local authorities. Even I, with my limited financial acumen, have been able to grasp what the Government were about, or thought they were about, last year. But life has moved on 12 months and various political and economic pressures have developed. We have another White Paper. In it, the Chancellor, ably supported by the Minister of State, has not condescended to provide us with the same table.
Not being versed in these matters I find it hard to relate the projections on public expenditure in the latest White Paper with projections in the previous document. The only help I have been able to glean from the current White Paper is from Table 4.4. In a sense, this is the crux of what we were debating last week. It shows the breakdown as between local government current and capital expenditure. The thesis to which I am devoted at the moment—I made the point on Thursday night to a not-very-full House—is that what is crippling this country at the moment is not the scale of our capital expenditure, which diminishes as the years pass, but the scale of our current expenditure—in other words, the scale of our fixed overheads.
There is a temptation to which Chancellors and local government treasurers succumb in moments of economic anguish. They make immediate cuts in all capital expenditure. Roads, hospitals and schools are postponed. We felt the impact in East Kent very acutely. The new hospital that we so badly need in Dover recedes into the early years of the twenty-first century at the current rate, but the line that continues unabated is the current


expenditure of both central and local government—the fixed overheads, the Government payroll.
We are apt to talk about the Government's payroll rather slightingly when we refer to the mass of Parliamentary Private Secretaries who receive nothing more than their parliamentary salaries and a mere 60 or 70 Under-Secretaries of State, Ministers of State and Secretaries of State. But that payroll is as nothing compared with the main payroll of central Government, which is now running at well over £17,000 million and is likely to continue at the rate of £16,600,000 into 1979–80.
If one's eye travels down, as your assuredly will, Mr. Deputy Speaker, to the local authorities' line, one sees that the current expenditure of local authorities remains obstinately at the £8,800 million mark for 1975–76, and so on into 1979–80, while its capital expenditure drops from £3,894 million in the current year to £2,983 million in 1979–80. In other words, the ratio between current and capital expenditure worsens every year.
I am all for economies on every front. I am a Gladstonian in the sense that I am for saving candle ends, as I hope the Minister of State is. Alas, there is little evidence of any saving of candle ends. The candelabra have been turned up—if one can turn up candelabra—over the last two years. We would like to see a dimming of the lights in Great George Street and in county halls throughout the country. We do not want cut-backs in schools, hospitals and roads programmes, but—this is no disrespect to devoted local government employees—there are too many of them at the moment. The cuts must fall somewhere and I believe that they must start there.
That brings me to the Order. We are asked to agree that the limit should be increased from £2,000 million to £4,000 million. I ask the House to relate that to the projected expenditure of local authorities in Table 4.4. It will be seen, as I have laboured over-long to the House, that capital expenditure in every year is below £4,000 million. The irresistible inference is that the loans from the Public Works Loan Board will be used to finance the current expenditure of local authorities.
I have a simple, almost nineteenth century, approach to these matters. I can see nothing more destructive of local authorities' economies than having to borrow to pay the wages of their employees. That way lies destruction.
I should like to address some simple questions to the Minister of State. First, to what local authorities, on the whole, are these loans to be directed? It is important to know, because there has been a tendency of late to channel funds to bodies such as the Greater London Council and away from bodies such as the Kent County Council. Of course, it can only be a coincidence that the Kent County Council is Conservative-controlled while the GLC, by misfortune, though perhaps not for long, is Labour-controlled. We should like some reassurance on where this largess is to be distributed. Will it be made with an even hand across the country or will it be channelled to the choice of a few? For what kind of projects will it be made available in a period of economic stringency? Am I right to infer or deduce that it will be used to buttress the current expenditure of local authorities, or will it be for worthwhile capital projects?
What interest will be needed to serve these loans? Many of my hon. Friends have come back to this point again and again. We need a reassurance on that matter. Finally, how is it likely to affect the rate burden?
These are small, niggling points, which have worried me. [Interruption]. Obviously they worry hon. Gentlemen opposite, too. I am happy to find this broad measure of agreement. There are obviously some candle-end men across the Floor of the Chamber. They, too, have seen the light. The traumatic experience of last week has made them Gladstonians. It might gladden the heart of the right hon. Member for Devon, North (Mr. Thorpe) to find that, even if they are not with him on this side of the House or in the voting Lobby, at least their hearts palpitate with his. We are all Gladstonians now.
These are important issues. It is possible to treat them lightly, but I hope no one has detected any levity in my approach to them. I notice the broad sympathy which unites the House on this occasion—so different from the taut debates that we had last week. But we shall


come back, over the months, again and again, to the same theme. The same challenge will be presented to hon. Members opposite, and they too will have to decide whether they are Marxists or Stalinists. In which camp will they fall? Can they demonstrate, like us, that they too are Gladstonians?

11.6 p.m.

Mr. R. B. Cant: This mixture of seriousness and levity is a great insult to local government and those people who spend a great deal of time doing worthwhile things. I do not wish to count myself with them, because I am in a very modest mood. But one thing must be said—that, maligned as local government is, it not only has the capacity to respond to all these challenges, new duties and responsibilities which are thrown on to it by central Government—it can spend the money if necessary—but it also has the capacity to react to any situation in which a Secretary of State may say that the party is over and that we are living in a colder and harsher climate.
I think people would be surprised at the extent to which local authorities—these great "spendthrifts", which have been accused of going ahead at 10 per cent. a year—have shown a responsibility, and a responsibility that will be seen in years to come. I am very happy to say that of the two authorities of which I am a member, one of them—a county council—has increased its rate by 7 per cent and the other—a district council—has increased it by only 5 per cent. That is the point I want to make.
The hon. Member for St. Ives (Mr. Nott) insults local government in the sense that he asks whether we realise that capital expenditure, so-called, is really revenue expenditure in disguise.

Mr. Nott: What I said was that I should like the Minister of State to comment on the question whether some money raised as capital by local government finds its way, by leakage, into revenue expenditure.

Mr. Cant: The hon. Gentleman spoke of leakages, with a look in his eye that suggested that he disapproved fervently of this practice. He suggested that this was a blinding revelation that had come

to him, probably as he sat on the Opposition Front Bench. Of course, this goes on, but it can be restrained in the circumstances of today. I feel very strongly about this. Does the hon. Member for St. Ives refer to the fact that many local authorities accumulate capital out of revenue in order to finance their capital expenditure?
I should very much like to continue——

Mr. Lawson: Go on.

Mr. Cant: If the Opposition want me to go on, I shall do so.
The whole area of public and local authority loans should be reviewed. The problems began when, in 1956, the wretched Tory Government threw the poor defenceless local authorities on to the market for a substantial proportion of their capital spending. It is time—[Interruption]. I cannot continue, because of the applause, but I suppose these problems will be solved.

11.10 p.m.

Mr. Denzil Davies: With the leave of the House, Mr. Deputy Speaker, I shall reply to some of the questions raised during the debate. The hon. Member for St. Ives (Mr. Nott), who understands these matters, rightly said that we were concerned here not with the public expenditure programmes of local authorities, but merely with their maximum borrowing after capital spending had been decided. I recognise hon. Members' concern about this matter.
The hon. Member for St. Ives asked whether it was possible to use capital funds for revenue expenditure. I shall read from a note that I have just received which says that loans of the Public Works Loan Board cannot be used legally to finance current expenditure. That may not give the hon. Member the complete answer but it goes a long way. I would be surprised if loans raised on the market could be used for current expenditure.
My hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) said that he would be surprised if that were the case.

Mr. Cant: I hesitate to interrupt, because of the time, but surely that is not the case. On many occasions one gets the aggregation of a considerable number of small items of expenditure. Perhaps


I said that this could be associated with some capital item, such as a school building, but I have always understood that having obtained the money for the school one could then go forward and aggregate the desks and pencils for loan sanction.

Mr. Davies: The hon. Member for St. Ives is also concerned with Welsh housing. [HON. MEMBERS: "Answer."] I am sure that hon. Members are satisfied with that explanation, and that it is as clear to them as it is to me. I suggest that the hon. Member for St. Ives joins the Welsh Grand Committee and asks his questions there. I am sure that hon. Members will be glad to see him, because he is an engaging speaker. No doubt the Opposition will find room for him.
The hon. Member asked me about the total burden of interest, but I confess that I do not know the answer. I shall send him the breakdown of local government's contribution to total debt interest.
The hon. Member for St. Ives is right to say that borrowing abroad by local authorities has fallen considerably. We do not expect it to be revived, because the terms available will not be acceptable.
The hon. and learned Member for Dover and Deal (Mr. Rees) proclaimed that he was a Gladstonian. I presume that he was referring to Gladstonian virtues and not Gladstonian vices. I assure the hon. and learned Gentleman that there is no question of discriminating against his splendid local authority in Dover. These matters are dealt with equitably and strictly.
The hon. and learned Gentleman correctly read out the figures of proposed capital expenditure in the White Paper, and said that he preferred capital expenditure to current expenditure. But schools need people to teach in them. It is not easy to isolate such expenditure, as the Opposition try to suggest. We do not accept that argument, because cutting current expenditure would increase unemployment, as most of it is spent on wages and salaries.

Mr. Lawson: Is the Minister aware that cutting capital expenditure also can have an effect on employment in the construction industry, and that therefore his argument about the employment effect of cutting capital and current expenditure

does not hold water, as he would find if he read the recent Report of the General Sub-Committee of the Expenditure Committee?

Mr. Davies: I constantly read the Reports of the Committee, and I accept much of what the hon. Gentleman says. These matters are not simple. Cutting either current or capital expenditure will cause unemployment. The Opposition want to cut expenditure and thereby increase unemployment even more.
I have said that the requirement for the Public Works Loan Board in the coming year will be about £1,500 million, which is slightly more than last year. That accords quite well with the £3,412 million in the public expenditure White Paper. Local authorities are entitled to borrow according to a formula, so part of that expenditure would come from the Public Works Loan Board. Some would be borrowing to meet capital expenditure and some for the re-financing of debt. The figures are not out of line. They are fairly close to what is in the table.
This is purely a mechanism to enable local authorities to borrow. We shall continue to debate how we control Government expenditure—whether we should control more, and whether we should reduce capital expenditure, but in the Order we are concerned with carrying out decisions to enable local authorities to borrow.
The point may well be made by my hon. Friend the Member for Stoke-on-Trent, Central that we often impose obligations on local authorities. The Conservatives' hands are not clean in this regard. They imposed enormous liabilities and obligations on local authorities. We are merely giving the authorities the opportunity to raise money to meet their obligations. If we want to control public expenditure, it is our duty to do so, but failure to approve the Order would mean penalising local authorities.

Mr. Tebbit: May we construe anything about public expenditure from the fact that, curiously, the draft Order has a blank where the price should be, followed by "p net". Cannot we even fix the price of such items these days?

Mr. Davies: We cannot. I am sorry to disappoint the hon. Gentleman.
I hope that the House will approve the Order.

Question accordingly agreed to.

Resolved,

That the Local Loans (Increase of Limit) Order 1976, a draft of which was laid before this House on 18th February, be approved.

ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.—[Mr. John Ellis].

BIRMINGHAM (HORTICULTURE MARKET)

11.29 p.m.

Mr. Ray Carter: As we move from the problems of local government loans to the problem of the new horticulture market in Birming-

Question put:—

The House divided: Ayes 111, Noes 7.

Division No. 87].
AYES
[11.19 p.m.


Armstrong, Ernest
Flannery, Martin
Roderick, Caerwyn


Ashton, Joe
Fowler, Gerald (The Wrekin)
Rodgers, George (Chorley)


Atkinson, Norman
George, Bruce
Rooker, J. W.


Bagier, Gordon A. T.
Golding, John
Ross, Rt Hon W. (Kilmarnock)


Bates, Alf
Graham, Ted
Sandelson, Neville


Bean, R. E.
Grant, George (Morpeth)
Selby, Harry


Beith, A. J.
Harper, Joseph
Sillars, James


Bennett, Andrew (Stockport N)
Harrison, Walter (Wakefield)
Skinner, Dennis


Blenkinsop, Arthur
Howells, Geraint (Cardigan)
Small, William


Boardman, H.
John, Brynmor
Smith, John (N Lanarkshire)


Brown, Hugh D. (Provan)
Kerr, Russell
Snape, Peter


Brown, Robert C. (Newcastle W)
Kilroy-Silk, Robert
Spearing, Nigel


Buchanan, Richard
Lamborn, Harry
Stallard, A. W.


Callaghan, Jim (Middleton & P)
Lamond, James
Steel, David (Roxburgh)


Canavan, Dennis
Leadbitter, Ted
Stewart, Rt Hon M. (Fulham)


Cant, R. B.
Litterick, Tom
Stoddart, David


Carter, Ray
Loyden, Eddie
Stott, Roger


Cartwright, John
Lyons, Edward (Bradford W)
Strang, Gavin


Clemitson, Ivor
McElhone, Frank
Taylor, Mrs Ann (Bolton W)


Cocks, Michael (Bristol S)
MacFarquhar, Roderick
Thomas, Ron (Bristol NW)


Cohen, Stanley
McGuire, Michael (Ince)
Tierney, Sydney


Coleman, Donald
Mackenzie, Gregor
Tinn, James


Concannon, J. D.
Mackintosh, John P.
Urwin, T. W.


Cook, Robin F. (Edin C)
Maclennan, Robert
Wainwright, Edwin (Dearne V)


Craigen, J. M. (Maryhill)
McNamara, Kevin
Walker, Terry (Kingswood)


Crawshaw, Richard
Madden, Max
White, Frank R. (Bury)


Cryer, Bob
Marks, Kenneth
Whitehead, Phillip


Davidson, Arthur
Marquand, David
Whitlock, William


Davies, Denzil (Llanelli)
Marshall, Dr Edmund (Goole)
Wilson, Alexander (Hamilton)


Dean, Joseph (Leeds West)
Maynard, Miss Joan
Wise, Mrs Audrey


de Freitas, Rt Hon Sir Geoffrey
Mellish, Rt Hon Robert
Woodall, Alec


Dormand, J. D.
Millan, Bruce
Woof, Robert


Duffy, A. E. P.
Morris, Alfred (Wythenshawe)
Young, David (Bolton E)


Eadie, Alex
Murray, Rt Hon Ronald King



Ellis, John (Brigg & Scun)
Oakes, Gordon
TELLERS FOR THE AYES:


English, Michael
Ogden, Eric
Mr. James A. Dunn and


Evans, John (Newton)
Ovenden, John
Mr. James Hamilton


Ewing, Harry (Stirling)
Parry, Robert



Fernyhough, Rt Hon E.
Peart, Rt Hon Fred





NOES


Carson, John
Morrison, Hon Peter (Chester)
TELLERS FOR THE NOES:


Clark, Alan (Plymouth, Sutton)
Rees, Peter (Dover & Deal)
Mr. Nigel Lawson and


Cooke, Robert (Bristol W)
Tebbit, Norman
Mr. Ian Gow


Dodsworth, Geoffrey

ham, I say to the Treasury Bench that it is not so much a Government loan that we want as a straightforward cash grant.

The problem I am about to raise is a long-standing one, particularly as it affects the move from long-established horticultural market to the new market and the consequent rent increases.

This is a problem involving the City Council, the Government and the traders. It has principally been brought about by inflation, which has wrecked the whole project of the new horticulture market, as it has wrecked the Nine Elms project in London and numerous other market projects elsewhere. At present the difficulties we have in Birmingham are centred on the rents that have to be charged by the City Council to the traders to recoup the enormous costs involved in


the building of the market. The reason why I have raised this subject is that the whole problem is coming to a head on 13th April—not a Friday, I might add-when the market will be officially completed.

I shall give some financial background to the problem. It is estimated that the final cost of the market will be £11,657,284. If we subtract from that figure Government and other grants we are left with a figure of £6,881,356. That adds up to an economic rent—if we are to recoup the total cost of the construction of the new market—of £3·10 per square foot per annum. Everyone in the city of Birmingham knows, and the Minister and everyone else associated with the problem recognises, that that is a totally unrealistic figure. The traders could not be expected to pay it. What is more, the City Council could not expect to see it paid. Recognising this, it has said that it is prepared to subsidise the whole project to the tune of £210,000 per annum, which gives an effective subsidy of £1 per square foot per annum.

The point is that the Birmingham ratepayers will be paying that money. It is a fairly hefty sum—£250,000. They should not have to bear any cost at all, bearing in mind that the old market made a profit. It is my opinion that it is quite unreasonable and totally unfair that the Birmingham ratepayers, private and commercial, should be expected to support a venture of this kind to that extent. Even with the subsidy, the figure is considered by the traders to be too high. The authority has been engaged for well over a year in negotiations with the traders to try to resolve this problem.

I have written numerous letters to the Government on behalf of the City Council and the traders, appealing to the Government to give assistance and to recognise our problems. I have, with other colleagues, two of whom—my hon. Friends the Members for Birmingham, Perry Barr (Mr. Rooker) and Birmingham, Yardley (Mr. Tierney)—are here tonight, been to see the Minister of Agriculture. We have laid our problems before him and he has always appeared to be sympathetic. But we have always come away empty-handed. In spite of all of our efforts it has not been possible to find a compromise.

I can see some strength in the traders' point of view, particularly when we compare the rent required by the City Council—even the subsidised rent of £2·10 per square foot—with rents charged elsewhere. In Manchester the rent is £1·96 per square foot. In Bradford it is £1·87; in Liverpool, £1·55; in Leeds, £1·28; and at Nine Elms, £2·47. The Nine Elms figure is not entirely realistic because the service charge is involved, as it is not in Birmingham, but adding 7·5p per square foot in Birmingham gives a rent there of £2·85 per square foot, and that is well in excess of anything being charged in the rest of the country.

I do not want to go over all the background, because I hope that one of my hon. Friends will be able to do that if he catches your eye, Mr. Speaker, at the conclusion of what I have to say. However, it is generally recognised that this is a matter of Government responsibility. It was the 1964 legislation that made it possible to get the project off the ground in the first place, as it did other markets. By that legislation the Government guaranteed that they would meet one-third of the cost of the construction of the market. That was in the balmy days of 2½ per cent. to 3 per cent. inflation per annum.

Since then we have gone through rates of inflation of 5 per cent., 10 per cent. 15 per cent. and almost 25 per cent. per annum. That has completely wrecked not just the costing of the market but the rents envisaged back in the 1960s, when the project was started.

Other factors are involved, quite apart from the clear commitment of the Government to supporting markets such as this. I have mentioned them on many occasions. One is that, like so many others, Birmingham market no longer caters only for the immediate area. There was a time when, because of the restrictions of transport, marketing, and so on, Birmingham would have been a regional market, but that is no longer the case. It caters for the national community. People come to Birmingham to buy the Evesham produce, and produce from the north-east, the west and south of the Midlands. To that extent it has become a national market and it has to compete with other national markets throughout the country, even as far afield as Glasgow.

Anything done to impair the ability of Birmingham to compete with those other markets will naturally undermine it, and one would not have thought that the Government, having put so much into the project, would condone or stand to one side to watch its failure.

Another market started at the same time was Nine Elms, which is known to be in desperate financial straits. It is known that, sooner or later, because of the problems of Nine Elms, the Government are likely to come forward with legislation to put that market on a sound financial basis. If that is so—and most people in Birmingham believe that it is—we should like the same treatment, with the problems of Birmingham being similarly recognised and catered for.

Another problem is that Birmingham market caters for an area much wider than simply Birmingham. To some extent, it is a national market, and we do not see why the city ratepayers alone should have to bear the cost of supporting a market that covers a much wider area than just Birmingham. Something should be done to assist the Birmingham ratepayers and to relieve them of this burden.

We already know that, on the basis of the £2.10 rent, subsidies are needed from the rates. If traders are driven away because of the rent, less space will be taken in the market and even greater subsidy and more support from the rates will be required.

In Birmingham, we believe—and the traders support us—that additional costs, whether in commission fees or anything else, will inevitably have to be passed on to the consumer. That means that Birmingham families will have to spend more, because of the cost of agricultural production. Why should we have to pay more for a problem that is a regional and national responsibility?

I hope that the Minister will seriously consider what is said tonight and, even at this eleventh hour, give the new market additional support to enable the City Council and traders to reach an amicable agreement and remove the threat of the very high rents that will have to be charged to make the project a worthwhile concern.

If we do not get a satisfactory reply, some traders will carry out their threat

of moving to cheaper accommodation, leaving the new market, if not a white elephant, at least an under-used and costly item of public expenditure from which no one will get out precisely what he puts in.

11.43 p.m.

Mr. J. W. Rooker: I am grateful to my hon. Friend the Member for Birmingham, North-field (Mr. Carter) for allowing me to intervene in this short debate.
In this House we spend many hours debating the price of food, but we rarely touch on the aspect with which this debate is concerned—the strategic importance of food distribution.
I heard hon. Members who saw the notice of the Adjournment subject today laugh and ask what horticulture had to do with Birmingham. The new market is of crucial importance to places as far from Birmingham as Scotland and Wales. They depend on the market for their food distribution.
I fear that the market could become a white elephant. It is a fantastically large building. We could, perhaps, fill it with Concordes. It will be a tragedy if the market is not filled to capacity with traders.
The important point is that we are living in a time of crisis. We are a small, highly urbanised island of 50 million people and it is of crucial importance that our food distribution system has no weak links.
If traders are forced out by the City Council and the market does not succeed, the repercussions will be felt far beyond the West Midlands, and our sophisticated system of food distribution will be distorted, with all the fluctuations in market prices, artificial shortages and exploitation that that can create.
We remember what happened two years ago in Darwin, Australia, after the hurricane, when, overnight, the price of a cabbage went to £1 and the price of a bottle of milk rose to 50p. That is what happens when a sophisticated food distribution system breaks down. There can be no more sophisticated distribution system in the world than exists in this island, which imports half its food and is densely populated.
I hope that the Parliamentary Secretary will answer the questions posed by


my hon. Friend. We have been on too many delegations, written too many letters and put down too many Parliamentary Questions not to be entitled to receive answers. We must have an answer to give to the Birmingham ratepayers.

11.45 p.m.

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Gavin Strang): I am grateful to my hon. Friend the Member of Birmingham, Northfield (Mr. Carter), who initiated this debate, because it gives me the opportunity to express my admiration of the efforts of the City of Birmingham District Council which has been engaged for some years in the major operation of rebuilding and modernising the whole complex of markets for meat, fish and poultry, in addition to that for fruit, vegetables and flowers.
The meat, fish and poultry markets have been operating successfully for nearly two years. Construction of the wholesale horticulture market, part of which has been in use since last year, will shortly be concluded. If as I hope the present difficulties over the market rents are resolved, it will bring fresh opportunities for traders and will, I am sure, contribute significantly to increased efficiency in the distribution of fruit and vegetables.
A project of this size, which has involved rebuilding on the site of the old markets while allowing trading operations to continue, has required careful planning. It was not possible to start everything at once, and the cost inflation of the last few years and the higher borrowing rates of this period have borne heavily on this the larger part of the markets complex. Its cost has been considerably more in consequence and in proportion to the other markets than was planned. I expect that the city of Birmingham will have had these factors in mind in planning the rent structure for the markets.
I understand that the wholesale traders have not differed significantly from the view of the Council over the siting of the new market. They wished it to be built broadly where the old one stood in the central area of Birmingham. Although differences over some design

details were expressed some years ago, they have declared themselves generally satisfied with both the size and the design of the horticulture market, which is now so near to completion. They are, however, unhappy about meeting the share of the costs which the Council has allocated to them. This we can all understand in these undoubtedly difficult economic times, but it is basically a matter to be resolved between landlord and tenants if business is to continue and the benefits of this imaginative project are to be fully realised.
As my right hon. Friend the Minister pointed out in reply to my hon. Friend the Member for Birmingham, Perry Bar (Mr. Rooker) on 29th January last, he cannot intervene in the rent discussions between the City of Birmingham District Council and its tenants. I am, of course, aware of the hope of both sides, which was put by them to my right hon. Friend at a meeting last June and to my hon. Friend the Minister of State before that, that the Government might be able to increase the grant payable on the market and thus do something to close the gap between the two parties to the discussions. However, I regret that I cannot see any prospect of our increasing the maximum rate of grant of one-third for these markets provided for in Section 10 of the Agriculture and Horticulture Act 1964.
The Government are already meeting one-third of the eligible capital costs of the Birmingham wholesale horticulture market under the provisions of that legislation, which will have helped with the redevelopment of 15 major markets and assisted with significant improvements at two more. The costs we are helping to meet are the final out-turn costs. Thus, the grant paid has risen proportionately with the rising costs of construction.
In addition, we have successfully furthered the Council's claim for EEC grant on the markets complex as a whole. This has been made possible by the Government's provision of grant for the horticulture market and will provide about £1¼ million in addition to rather more than £3½ million from the United Kingdom Government. Furthermore, we have recognised that Birmingham may experience difficulty for reasons outside its control in meeting the terminal date


of the grants scheme, of 14th April next, which is set by the 1964 Act.
My right hon. Friend promised last year that, if work had still to be done after that date for reasons outside the control of the Council, he would consider sympathetically the case for payment of grant on such work. It would appear that periods of inclement weather during the winter together with other factors may have delayed limited parts of the project, and my officials are now in consultation with city officials to judge the effects and the need for special consideration.
Despite the very considerable help afforded from both the Government and EEC sources, I appreciate that the balance to be met in respect of the horticulture market remains a good deal higher than was expected when the markets complex started construction in 1972. I am afraid, however, that I cannot offer any further financial help. I would, however, urge the traders and the Council to continue their efforts to reach a mutually acceptable solution. I know that there is good will between them and both sides are anxious that the market should continue to give the service to the public and horticulture producers that it is capable of doing. I very much hope that early progress may be made in settling the matter by negotiation between the parties, but it is not for me to intervene on one side or the other to try to bring this about.
We have all been struck by the remarks of my hon. Friends representing Birmingham. I think that if a lobby—I use the word in no uncomplimentary sense—deserves to succeed on the basis of the extent to which hon. Members and others have assiduously promoted its cause, this lobby deserves to meet with success.
I acknowledge that hon. Members and the city council have made repeated representations to the Ministry, and I appreciate the concern they feel with regard to the burden which the trade may have to meet in relation to rents and the rate burden on the inhabitants of the city. My hon. Friend the Member for North-field was sufficiently broadminded about this to acknowledge that the problem of Birmingham city market is not unique but

is shared by the Manchester and Bradford Markets and the new Covent Garden Market.
Only last week I visited the new Covent Garden Market, not specifically to talk about the problems of the market but more to look at its operation, in particular the grading of imported produce. It is, however, the case that it is finding difficulties. One of the issues raised with me by the merchants was the level of rents and the various devices by which the management has sought to increase the income from the merchants and traders to finance the market.
One of the problems here—it applies to all costs affecting horticultural produce—is that the price paid to the horticulture producer depends almost entirely on the relationship between supply and demand, and therefore, basically, on the supply. There is no way whereby the price can be automatically lifted in order to take account of these increased costs, although one accepts, because really there can be no argument about it with regard to Birmingham, that the very fact of the new modern market should increase efficiency and reduce costs.
I regret that I am not able to give my hon. Friend a more helpful reply. While he was right to draw a parallel with the difficulties being experienced by the new Covent Garden Market—and the Government are looking at the question—he will acknowledge that he would have to be careful about drawing a strict comparison between the Government's relationship to the Covent Garden Market Authority, a single-purpose statutory authority, and their relationship to market authorities which are owned by local authorities.
The Government have helped the market in three ways. We have paid the maximum grant of one-third. The officials in the Ministry have helped to ensure that the City Council received a grant from the FEOGA special projects fund, a grant which the City Council could not have taken into account when it started to build the market. Furthermore, we have given the assurance that, even if some of the work is not finished by the terminal date, we shall look sympathetically at the question of paying grant on that work.
I realise that there is still a gap to be closed, and I do not want to underestimate the difficulties. We shall consider very carefully the remarks of my hon. Friends, and we shall give this matter consideration. If I have sounded pessimistic, it is because of the public expenditure circumstances in which the Govern- 
Ment must operate, and I am sure that my hon. Friends would not want me to raise false hopes with them or with the Birmingham City Council.

Question put and agreed to.

Adjourned accordingly at four minutes to Twelve o'clock.